(This week's blog post is contributed by a leader I respect for his courage, experience, and results. Rod Collins is former chief operating executive of the Blue Cross Blue Shield Federal Employee Program, one of the nation's largest and most successful business alliances, with over $19 billion in annual revenues. He is the author of Leadership in a Wiki World: Leveraging Collective Knowledge To Make the Leap To Extraordinary Performance.)
If someone told you that the greatest invention of the last hundred years was a machine, you would almost certainly agree. You might be surprised, however, to learn which machine has earned this unique designation. While your likely list of candidates would probably include the automobile, the airplane, or the computer, the business guru Gary Hamel asserts that the greatest invention of the last century was a different kind of machine—one that might not immediately come to mind. That honor, according to Hamel, goes to management. Should you have trouble visualizing management as a machine, just take a look at any organization chart and you will obviously see a mechanical schematic.
What's interesting about this greatest invention is its durability. While other inventions have gone through a steady stream of incremental or evolutionary changes, management has remained relatively constant for almost a century. So, while we've come a long way from rotary phones to wireless cell phones, the hierarchical management architecture that was used to run the first assembly lines is still used today to manage 21st century organizations. But this is about to change—in fact, the change has already begun—because of three sudden developments that are revolutionizing the world of work and changing the rules for how organizations get things done.
The first of these developments is the incredible accelerating pace of change that has overtaken every industry over the last two decades. The unprecedented speed of market evolution is dramatically altering the business landscape. While executives across all industries readily acknowledge that the world is moving faster, what they don't fully comprehend is that the increment of time for market change is now shorter than the increment of time for moving information up and down a chain of command. This means that the social technology of the hierarchical organization cannot keep pace with the speed of change in today's faster moving markets. When you have to manage at the pace of accelerating change, organizations have to be built for speed.
The second development is the ascendance of knowledge networks and the decline of facilities and machines as critical economic assets, resulting in a radical transformation of the primary means for creating economic value. As the production line gives way to the knowledge network, company economies shift from scalable efficiencies to scalable learning. When scalability is defined by efficiency, cost cutting is usually the driver of economic value. However, when scalability is a function of learning, it's innovation that drives value. Apple and Zappos don't focus on cutting costs. Their line of sight is riveted on understanding what's most important to customers and then scaling this knowledge to create innovative products and processes that wildly delight customers and dramatically increase revenues. If companies want to realize the new economies of scale, they have to be built for innovation.
The third development is that the Internet has created the unprecedented capacity for mass collaboration. The game-changing contribution of the Web is that it is a revolutionary new medium where individuals anywhere in the world can speak to one another without going through a central organization. For the first time in history, we have the capability for large numbers of geographically dispersed individuals to effectively and directly work together in real time—and they can do it faster, smarter, and cheaper. That's why the innovative operating models of Google, Linux, and Wikipedia are revolutionizing the way organizational work gets done. The best companies in our new digital age are built for collaboration.
The most significant consequence of these three developments is that networks leveraging collective knowledge are now smarter and faster than hierarchies amplifying the voices of supposed smart individuals. It is highly likely that the last large major organization designed as a hierarchy has been built and there will be no more. The large organizations born in the digital age will look like Google, not like General Motors. That's because networks are far better suited for speed, innovation, and collaboration, while hierarchies, unfortunately, are inherently slow, incremental, and compartmentalized. As more start-ups discover this 21st century lesson, we can expect the gap between hierarchies and networks to widen quickly.
While it's too early to speculate what will be the greatest invention of the 21st century, should it turn out to be management again, we can be certain that this time the greatest invention will not be a machine. That's because management after the digital revolution will require a complete makeover to meet the demands of speed, innovation, and collaboration. And if Google, Linux, and Wikipedia are true prototypes of the redesign, the mechanical structures of top-down organizational charts will likely give way to the organic lattices of peer-to-peer networks.
Seth Kahan (Seth@VisionaryLeadership.com) is a Change Leadership specialist. He has consulted with CEOs and executives in over 50 world-class organizations that include Shell, World Bank, Peace Corps, Marriott, Prudential, American Society of Association Executives, International Bridge Tunnel and Turnpike Association, Project Management Institute, and NASA. He is the founder of Seth Kahan's CEO Leaders Forum, a year-long learning experience for CEOs in Washington, DC. His book, Getting Change Right: How Leaders Transform Organizations from the Inside Out, is a Washington Post bestseller. Visit GettingChangeRight.com for more info and a free excerpt. Follow Seth on Twitter. Learn more about Seth's work at VisionaryLeadership.com.