Memo to business: the cheese has moved again.

• Author: Hall, Robert
• Position: Marketing Solutions

I am like the mouse in the trap. I have pretty much given up on the cheese and am just trying to get my bead out of the trap.

--Weary owner of a major league baseball team after announcing its sale.

In the midst of the current economic meltdown it is hard to get a handle on what is short-term trauma resulting from the shock of the current crisis and what is the longer-term structural shift that represents fundamental change for business and the economy.

The tumult of Wall Street, Detroit and the coming shift in health care appears to represent structural shifts in market needs, business models and the role of government. One of those shifts involves the role of specialization.

For decades, fortune has smiled on the enterprise growing large by becoming more specialized and segmented. It has been the structure de jour for differentiation, efficiency, profitability and dominating in size. Yet in recent months, we are seeing that specialization and scale have taken a hit. Is it possible that we have driven Henry Ford's divisions of labor and specialized assembly line over a cliff? Let's examine four examples.

Large financial services providers became dependent on highly specialized and at times risky products like credit default swaps to juice up the earnings of their core businesses such as banking or insurance. Like steroids in professional sports, once one group gained a competitive advantage, it became much more difficult for others to remain competitive without them. By the midpart of this decade, the financial sector was producing over 40 percent of U.S. corporate profits, up from the midteens in the late 1970s and early 1980s. By comparison, the older, core businesses looked pedestrian and the lion's share of the attention, rewards, resources and focus was on these new specialties. Making money the old fashioned way--earning it by working hard at the core business--looked less attractive. Not surprisingly these core businesses became less competitive and profitable. As a result their workers, customers and shareholders all became less excited about what they produced.

Detroit's automotive business is now about to become much smaller and primarily owned and controlled by the unions, the government and possibly a foreign company. Somewhere along the way, while the auto companies were expanding into credit cards, finance and too many overlapping products, they lost their focus on their core business of building the type and quality of cars...