I am a fan of Steve Denning, author of Radical Management: Reinventing the Workplace for the 21st Century (Jossey-Bass, 2010) and regular contributor at Forbes.
In his recent article, “The Management Revolution That’s Already Happening,” he writes:
“In the 20th Century, firms had often been successful by following the precepts of hierarchical bureaucracy: ‘focus on making money’; ‘tell employees what to do’; ‘control performance through rules, roles, plans and reports’; and ‘achieve efficiency through economies of scale.'”
In the last quarter of the century, corollaries were added: “focus tightly on maximizing shareholder value”; “strategy is about coping with competition”; and “lower costs by off-shoring.” These principles worked as long as oligopolies dominated the marketplace. Firms could succeed with limited innovation, often by copying what had already been pioneered by others.
Then globalization and the Internet changed everything. Hierarchical bureaucracy couldn’t cope. Attempts at achieving continuous innovation led to unmanageable internal complexity, while attempts at limiting innovation accelerated organizational death.
I have repeatedly argued similar points for a more than a decade now, including in a recent Fast Company post: “Creating a Company Designed for the Long Haul.” I believe we will need to rethink how we organize and manage this creative innovation era.
It will require us to create cross-functional cross-disciplinary “talent clusters” inside and outside of our organizations.
By now, the notion of knowledge, innovation, and/or business cluster has been well established for quite some time around the globe from Silicon Valley to Southeast Asia. A business cluster is a geographic concentration of interconnected business, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. One can argue that the concepts of business clusters goes back to the Japanese notion of keiretsu from the 1990s.
When written in Japanese, keiretsu comprises two characters, meaning “system” and “row.” Thus the term “keiretsu” is now used more generally to mean an alliance of companies and/or individuals that work together for mutual benefit. It can easily be argued that giants like Toyota, Virgin, Amazon, Disney, Apple, GE, etc. are all being led and managed on the principles of “clusters” internally and externally.
Although the concepts of knowledge/innovation/business cluster applied primarily outside of the organizations’ four walls, to survive and thrive in the creative innovation economy, organizations will need to create cross-functional talent clusters on an as-needed basis for creating and executing new ideas and innovation. I have expanded these ideas in great detail in my forthcoming book with Fast Company contributing writer and journalist Drake Baer—Everything Connects: How to Transform and Lead in the Age of Creativity, Innovation and Sustainability (Spring 2014, McGraw Hill). Here I’d like to share some basic points:
To reach a common goal people need to work together. This act of working together is “collaboration.” And successful collaboration requires the right people with the right information to make the right decision.
Creating a cluster is a way to drive value-driven outcomes quickly by assembling the right set of people regardless of their rank and file. Since jobs are increasingly shared and people, whether in small or large organizations, are wearing multiple hats, a cluster is a way of structuring that fluidity. Clusters are not a traditional hierarchical management structure. Instead, they’re multi-disciplinary, multi-functional collaborative networks to drive optimal outcomes. They come into being to address a particular challenge, and then dissipate to form other networks addressing other challenges.
In old days, organizations formed SWAT teams to solve tough problems, except in today’s constantly changing marketplace we constantly need those SWAT teams, aka talent clusters, with fluid structure. Clusters follow rules, just like hierarchical structures do such as accountability, reward systems, and measurements. However, clusters are a bottom-up structure, and they attract the resources they need, organize themselves around an agenda, and operate through their ethos. They are self-motivated, self-managed teams to drive vision, execute to create value, and influence an ecosystem.
Clusters produce results in the same way a species comes to dominate an ecological niche. Sustained biological dominance doesn’t come from a master orchestrator, but from the ability to adapt and move more quickly than competing species. Similarly, sustained market dominance doesn’t come from a singular leader, but from an ability to drive talent clusters to create an agile, resilient, and responsive organization.
Regardless of the geography or task, clusters have the following characteristics:
Tailored Agenda: Each cluster has a specific reason for existing–with an agenda of objectives that matches that purpose.
Time-bound Existence: Clusters emerge when needs arise. They disband when their objectives have been completed.
Evolving Membership: Membership to a cluster is not fixed, but is fluid, with talent and perspectives changing to suit tasks as they change.
Self-organizing Responsibility: Clusters develop their own structure and operational rules: They alone are responsible for their operation and its results.
Adaptive Ethos: The culture and personality of the cluster aligns with its purpose: Some are explorative, some are directed.
At the highest level, we can define three primary types of clusters, each mapping onto the life cycle of a product, process, or service. They are visioning, ecological, and implementation oriented.
Visioning Cluster: How does a product, service, or a new process begin? Like all living things, it must be conceived. This is the work of the visioning cluster: They sketch out the potentials of the desired outcome.
Ecological Cluster: An organization today constantly requires bringing new invention to market: suppliers, customers, intermediaries, and partners to realize value from our products and services. The ecological cluster’s primary purpose is to inspire, influence, and support our ecosystem with our vision.
Implementation Cluster: Ideas don’t become realized by their own free will. They need to be ushered into life by people. Just as the visioning cluster is composed of people that affect the conceiving of a new idea, the implementation cluster is composed of people that affect the commercialization of a product or a service. The agenda of the implementation cluster is to manifest the vision in the context of the ecosystem as described by the ecological cluster.
[Image: Flickr user Jackie Amsden]