The power of synergy

Today we discussed NBC Universal's symphony strategy of cross promoting upcoming products/releases across their different properties. While, in theory, this seems like a strategy that every entertainment company should pursue, it's difficult to execute because it requires long-term thinking. To facilitate this, Steve Burke told us that they don't use transfer pricing.

Transfer pricing makes it hard for business units to volunteer resources to other divisions because unit-level P&Ls suffer when they don't receive payment for their services. For organizations to pursue strategies based on synergy, there needs to be a high level of trust between divisions. Everyone needs to believe that there will be a give and take over the long-term and that their performance evaluations won't be negatively affected by making a sacrifice for the organization as a whole.

Hopefully more companies can find ways to monetize trust.