Open Wide

The traditional business organization meets democracy. This may hurt a bit.

In Max Barry's novel Jennifer Government, characters take their employers' brand names as their own surnames: His fictionalized world is populated by the likes of John Nike and Hayley McDonald's. The satire stings because we're so accustomed to the pervasiveness of big companies. They've been so entrenched for so long that they seem an inevitable part of how the world works.

But the emerging reality is something very different.

Look at what's happened in banking, once the unquestioned domain of behemoths such as Citibank. Now there's London-based Zopa, which harnesses the Internet to let borrowers and lenders connect and arrange loans directly. Bob needs bucks to self-publish a book; Bill wants money for home improvements. You make the loan! Consultant Patricia Seybold calls it the "eBay of banking."

Well, bankers, join the club. "Whether you like it or not, the traditional definition of an enterprise is being challenged." That was Virginia "Ginni" Rometty, who runs IBM's global consulting and services business, speaking at the company's Global Innovation Outlook summit last spring. The summit itself is evidence of this challenge: IBM used to do all its planning and forecasting about business and technology entirely on its own. Now it invites customers to join in with the smartest people it knows in government, nonprofits, and academia. And it makes the results public through conferences and reports.

Rometty has lived through all sorts of theories for organization: vertical, horizontal, matrixed, and now globally integrated. "But in one way or another, they are about hierarchy and rules, and they exist inside monolithic enterprises," she said. "So I want to challenge you on this: Is [the future] a world of a billion single-person enterprises—where you organize around an endeavor, to do something, versus organizing around your enterprise or your company?"

Think of the old pillars of corporate power: It used to be that only big companies could afford to own a computer. Only big companies could organize large numbers of people and make it possible for them to work together effectively. Only big companies could conduct advanced scientific research and technological development. Only big companies could advertise to the mass market of consumers. And only big companies had the capital needed to build and run manufacturing plants.

All of this is being transformed by the democratizing force of a new digital era that makes it easy for people, scattered and diverse, to come together quickly and communicate effectively even though they're not bound together by any kind of formal organization. Science is already becoming the pursuit of large numbers of individuals from around the planet collaborating in real time over the Internet. As for the costly work of manufacturing, nanotechnology promises to make it dramatically less expensive. Instead of ordering a computer monitor from Dell's factory, you'll buy a jar of "nano-ink" at Office Depot, then use your laser printer to print the ink onto a piece of paper or floppy plastic, forming all the circuitry of a monitor itself. The nano-ink will be manufactured in a chemistry lab that costs about $100,000 to build.

This dynamic is transforming the way nearly every large organization in every industry behaves. We expect cutting-edge Google to do something creative such as openly experimenting with new ideas through its Google Labs site, where it recently let people try out a real-time ride finder for taxis. What's really interesting is to see Fidelity Investments, the venerable mutual-funds firm, getting into the game. Its Fidelity Labs site features public experiments with a search engine geared for financial topics; free checking; and a "savings rate finder." Your input welcome!

The real point isn't that big companies are going away. Many will survive, but they'll need to reinvent themselves to participate fully in this new interconnected, networked, decentralized world. Procter & Gamble recently deployed 70 "technology entrepreneurs" around the world to look for "not invented here" ideas. It has figured out that for every one of its 7,500 in-house scientists, there are 200 more around the globe—some 1.5 million total—who are just as advanced. Ideas flowing the opposite way can have disruptive power too: Caterpillar, the old-line maker of heavy equipment, now sees itself as an "intellectual-property company." It has begun to aggressively license its copyrights and 7,000 patents to unlock their value.

Those are promising strategies. The more a company opens itself up to engage with the outside world, the better its chances. In this new era, scale won't guarantee viability in the face of massively interconnected customers, suppliers, and competitors. But all of those scientists and employees can do amazing things if they connect with what's happening outside your walls. John Nike won't know what hit him.

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Comments from the Fast Company Connection, a reader panel

Hierarchy values control. Control may make us feel more comfortable, but it is not as effective as getting buy-in. Hierarchy values exclusive knowledge. Exclusive knowledge makes us feel important, yet real value comes from being known as a good source of knowledge. Hierarchy is just a structure, one that works best when it deviates from its own values.

Madelyn Blair
Jefferson, Maryland
Pellerei Inc.


The concept of the virtual enterprise is not especially new. What has changed is the ability of folks from different enterprises to efficiently connect to reap the advantages of virtual scale.

John Lloyd
San Diego, California
Qualcomm


The global corporate elite don't really need to "reinvent" themselves in this "new interconnected, networked, decentralized world." I'd argue that the world is rapidly becoming more centralized. New technology, new ways of thinking, and organic networks are acquired by someone the moment they're seen as fiscally viable.

Cliff Watson
Omaha, Nebraska
Bozell

 

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1 Comments

  • Hamilton Mazakadza

    I agree that these days there are many managerial and finance theories. Everyone has their own views but companies should keep in mind that they should make a proper surety bond before going into a business contract.