Bringing the MARKET INSIDE.

This article presents an interview with Thomas W. Malone, professor of management at the Sloan School of Management at Massachusetts Institute of Technology (MIT). He defines an internal market as an arrangement where people inside a single company buy and sell things to each other for money or some kind of internal points. Internal markets are an intriguing way that people throughout a company can exchange much more rapidly and widely in a way that lets lots more people make decisions for themselves instead of just relying on people above them to tell them what to do. Information technology greatly reduces the cost and difficulties of having broad internal markets and therefore makes them more feasible in many more situations than they would have been in the past. According to Malone, MIT worked on a project with Intel to develop a scenario for how they could use an internal market to allocate their manufacturing capacity. Plant managers would sell futures contracts for a certain number of products to be delivered at a certain time in the future, and salespeople would buy those contracts in order to resell those products to their own external customers. Through the process of supply and demand, prices for different products at different times would vary.