Managing interdependencies among strategic business units (SBUs) is vital for a large organization to leverage synergies and maintain competitive advantage. While SBUs are semi-independent units, their success often relies on cooperation and alignment with other units and the corporate strategy.

Interdependencies can range from simple, linear relationships to complex, cyclical ones and generally fall into one of three categories:

Pooled interdependence

This occurs when two or more SBUs operate independently but draw from shared resources, such as a corporate cash reserve, technology platform, or brand reputation. Their success contributes to the overall corporate performance, but they do not directly interact with each other for day-to-day tasks.

Sequential interdependence

In this lined relationship, the output of one SBU becomes the input for another SBU. For example, a manufacturing SBU might produce components that a retail SBU then sells.

Reciprocal interdependence

This is the most complex form, involving a cyclical and mutual exchange of inputs and outputs between SBUs. For instance, a marketing SBU’s research could guide a product development SBU, whose new product is then sold by the marketing SBU in a continuous loop. This example is more than just a simple sequence of events. The interdependencies are high-intensity and cyclical, with continuous information sharing and mutual adjustments required to reach a complex, high-quality final product. A failure in one area, such as a software bug in the Operating System, will continue through the impact of the hardware, applications, and cloud services, forcing all SBUs to coordinate and adjust.

I am giving here below one the best examples of interdependence amongst the SBUs of Tata Group of Companies.

The Tata Group’s “One Tata” strategy emphasizes the interdependency of its Strategic Business Units (SBUs) to create comprehensive, group-level ecosystems. By leveraging the specialized capabilities of various companies, the group can develop holistic solutions for major initiatives, such as electric vehicles (EVs) and smart cities.

To create a complete EV ecosystem, multiple Tata companies collaborate to cover every aspect of the value chain. It’s a wonderful ecosystem created by Tatas.

Tata Motors designs, manufactures, and sells the actual electric passenger cars (like the Nexon EV) and commercial vehicles.

Tata Power establishes the charging infrastructure by setting up charging stations in public, semi-public, and residential areas.

Tata Chemicals manufactures lithium-ion battery cells for the EVs. It is building a dedicated plant for this purpose in Gujarat.

Tata AutoComp Systems: assembles the battery packs and other components for the EVs, localizing the supply chain.

Tata Technologies provides engineering and design expertise for the development of EV platforms.

Tata Consultancy Services (TCS) develops the payments and technology platforms, such as the mobile app for customers to find charging stations.

Tata Motors Finance: offers affordable financing solutions to make EVs more accessible to consumers.

Croma (Infiniti Retail) showcases the vehicles in its retail stores to provide a unique customer experience.

This fantastic interdependency of Tata Group of Companies is an excellent example of Pooled  Interdependence, Sequential Interdependence and Reciprocal Interdependence. In a pooled interdependence model, SBUs operate with relative independence but contribute to the overall success and reputation of the larger organization. This is the most common form of interdependence in a conglomerate like Tata. Tata has a brand reputation. A strong performance by any Tata company, such as Tata Consultancy Services (TCS), reinforces the “Tata” brand, which benefits all other businesses, including Tata Motors and Titan.  Tata Sons and other group entities provide centralized, shared resources that individual companies can access, such as talent management platforms, sourcing services, and financial controls. This is example of Pooled Interdependencies.

Sequential interdependence occurs when the output of one SBU becomes the input for another in a linear process. Within the Tata ecosystem, this often happens within business verticals. The manufacturing process for Tata Motors’ vehicles is an example of sequential interdependence. The assembly line requires components from a series of suppliers, including the group’s own automotive parts SBU, Tata AutoComp Systems. Tata Steel, one of the world’s largest steelmakers, supplies its products to other Tata companies, which then use the steel as a raw material for their own manufacturing processes.

Under Reciprocal interdependencies SBUs are mutually dependent and work in a back-and-forth manner to achieve a goal. This requires a high degree of coordination. The development of Tata’s EV ecosystem is a prime example of reciprocal interdependence. Tata Motors relies on Tata Power for the charging infrastructure network. Tata Power must coordinate with Tata Motors to ensure its charging solutions meet the needs of their electric vehicles. Tata Capital provides financing solutions for consumers purchasing Tata EVs, creating a feedback loop between sales, charging, and financing.

The fundamental premise of the theory of constraints is that organizations can be measured and controlled on three key areas: throughput (amount of material or items passing through a system or process), operational expense, and inventory. Inventory is all the money that the system has invested in the raw materials used to produce the finished goods, material in the production process (referred to as work-in-progress ), or goods that are in transit. As a result, throughput is the rate at which the system generates money through sales.

For reaching a goal, necessary conditions must first be met. These typically include safety, quality, legal obligations, etc. For most businesses including non-profit organizations, making money is an essential goal, therefore understanding how to make sound financial decisions based on throughput, inventory, and operating expense is a critical requirement.

The term “Herbie” comes from this record-breaking novel. To understanding the process of production we are told the story of Herbie by the protagonist of the novel – Alex Rogo. Herbie is the slowest kid on a hike in his Boy Scout troop.  The troop must stay closer enough together so that they can be supervised easily by an adult. They need to get to the campground before it is dark.  The speed of the hike is wholly dependent on how fast Herbie moves.  The proverb “A chain is only as strong as its weakest link” describes that if one member of a team doesn’t perform well, the whole team fails. The author compares business production to the hiking troop; how to get Herbie to move as fast as he can so that the troop reaches the campground faster. If Herbie’s backpack and other load is distributed among others troopers they can reach their destination faster.

Alex Rogo manages a production plant owned by UniCo Manufacturing, where everything is always behind schedule and things are looking dire. The book goes on to point out how identifying herbies makes it possible to reduce their impact and how it also helps in yielding a useful tool for measuring and controlling the flow of materials. Alex and his team identify the bottlenecks in their process and immediately begin to implement changes to help increase capacity and speed up production. In response to questions about the logic of using obsolete technology in modern manufacturing, Alex’s team buys in an old machine which they receive for free (which had previously been used at their plant in conjunction with two other machines) in order to increase the capacity of the NCX-10 machine, which had been identified as one of the two bottlenecks. In addition, they identify processes at the heat treat, identified as their second bottleneck, that caused massive delays in their getting product through heat-treat and which had also caused some products to be heat-treated multiple times (to make softer and then harder again) instead of just once or not at all.

The novel goes on to point out that a Herbie can be solved effectively, when each person in organization plays his role effectively. For example, a researcher is supposed to do his research and create an intellectual property. Instead, if he starts doing bookkeeping, he will only create another Herbie. Effective role playing solves many technical and emotional problems in business firms.

For smoothening the process people need to identify the system’s constraints, make strategies to exploit the system’s constraints, unanimously solve the problem to elevate the system’s constraint; the team to needs to go exactly to the point where the system has been broken. The constraints occur in equipments, people and policy. In the book, they discover they are running their manufacturing plant at 80% capacity. That means 20% of the time, they have machines and people just sitting there doing nothing. So they tell their sales manager to get them 20% more work. Ideal mind is devil’s workshop. Once people get used to sit ideal, changing their mindset becomes very difficult.

Most important message: when there is no Herbie in the business, when things are going smooth, finding one will only create many others.  The point is not to find the herbie in crisis, but always to keep a watch and look out for him. Changes never take place in the moments of crisis.  Crisis is an indication of unidentified flaws in the system.  As with treating the symptoms without the underlying bug can never bring effective change.

The centre theme of the book “The Goal” is that you shouldn’t let your business and processes control you and lead you. Instead, you should constantly disparage and review your processes and not settling for any bottlenecks or sticking points. One more major theme is that businesses want to earn profit. The way to do this is not to create as much as possible, but instead to run as efficiently as possible.