A note about how economic and cultural trends will force big organizations to revamp their institutional DNA to succeed in the marketplace. In short, big institutions will “wake up” from their morass when enough people (e.g. managers, employees, customers, fans) start using metrics and making decisions that incent real value creation.
John Hagel III, John Seely Brown (JSB), and Lang Davison, Why We Need Big Organizations:
… our 2009 Shift Index (PDF) found that only about 20 percent of today’s workers are “passionate” about their jobs–defined as loving what they do and working for more than just a paycheck. The Index also found that the most passionate workers were least likely to work for a big corporation.
Which raises a disquieting thought: will big corporations soon be filled only with people too timid to work on their own–the bureaucrats, the clock-watchers, and the resolutely non-talented? Will corporations slowly crumble under their own weight as inertia overwhelms their ability to respond to external events, and their talented people flee to become independent agents?
On the contrary, we believe big institutions will become more relevant than ever–once they focus not just on efficiency but on providing platforms for individuals to systematically experiment, learn, and innovate. As scalable learning replaces scalable efficiency big institutions will become more appealing to talented individuals. In fact, we believe they will become an irresistible magnet for passionate people seeking to amplify their individual efforts to develop faster.
… this assumes a dramatic transformation in the institutions that we have today, from institutions that flourish by suppressing individuality to ones where individuality must flourish in order for the institution to do the same. This will not happen overnight. But companies will eventually awake to the opportunity–indeed the imperative–this transition represents. Long-term competitive pressures ensure that the old guard institutions will wither and eventually die if they don’t.
From this perspective, we believe the current flight of passionate and talented people from institutional confines represents a transitional event rather than a permanent shift to a “free agent nation” or “e-lance economy.” People are fleeing today because our current generation of institutions undermines talent development in the name of efficiency. As a new generation of institutions emerges the current flight from institutions will reverse.
My comment:
The opportunity for large organizations to develop and support large-scale trusted relationships is missed by most, lost in the mire of company politics, exhausted by the tremendous effort spent allocating internal resources for internal gain instead of leveraging internal resources for external and internal gain.
Why do people still work for large organizations? At the moment, people are still willing to deal with the downsides in order to get the chance to leverage the big black box of the company to have an impact (internally and externally) at a scale still far larger [than] many next-gen organizations (or at least, difficult right now).
And that’s why the thoughts around organizational structures and the Big Shift are so important, because it recognizes that trendlines shift, economics change, and that the emergence of next-gen businesses and networks is part of the competitive pressure that will force organizations to adapt.
I agree with the trends and the destination (or, put more accurately, the next stop on the development process of economic organizations), the why and the where; the truly interesting part is the how.
How do companies wake up? People wake up. Will this awakening come from a recognition of loss, or will it come from a groundswell from the bottom of the organization? Or, perhaps, does it come from the middle layers, the layers of people with the depth of knowledge to recognize the limitations of their firms’ structures and the ability to do something about it? Will this happen as Generation Y hits middle management? Will companies study the variety of lessons from “next-gen” organizations like Threadless, Zappos, Netflix et. al. (all “next-gen” for different reasons) [and change]?
How many people have to wake up in a company for a company to change? Where in an organization do people have to wake up? How do these “enlightened” folks connect with like minds throughout an organization, across departments and across silos, to build the critical mass for a company to wake up?
And, coming back to the notion of impact and scale: many traditional large companies measure impact using different metrics than “next-gen” organizations: how will traditional organizations develop the meaningful metrics around their impact (depth and breadth, on the market and individual), co-opting the “social impact” metrics et. al. of next-gen organizations, in order to justify, measure and refine their strategies?
Perhaps large companies just need to figure out how to measure their impact a bit better to show them how to change; perhaps part of “how people wake up” is new metrics and methods of measuring their impact that incent them to wake up and change.
Obviously, the Shift Index is a big step towards creating the metrics necessary to shake people and companies awake.
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Highly Related
- Jeremy Heigh, What changes when we get more makers?
- Continuing with the thought, expanding on conversations with Bauley and Vermut and channeling past writings from Haque, Hagel, Brown and Davison over the past year about economic structures, a note of mine from May 30th, Five cultural and technological frames shaping new business opportunities:
Entrepreneurship may be the sexy thing getting all the attention today, but the fundamental, underlying question is really about how people will organize themselves to create economic value.
Vertical integration and horizontal integration may have fallen by the wayside, replaced by circles of small organizations, but the underlying economics shaping these organizational strategies aren’t set in stone. Current innovation strategies are based on creating modularized value chains using widely-available data to foster decentralized innovation – microbusinesses aimed at microinteractions – but we will reach a limit in how small each unit of the value chain can be divided until we develop more efficient methods for collaboration, compensation, incentive structuring and legal organization.
Under-innovation will drive many large firms out of business, but that’s the point: from creative destruction comes creative reconstruction, and the survivors (large and small) will be the ones that find ways to re-orient their internal structures to take advantage of new technological and cultural realities.
… To think that large companies will fail to adapt is folly; all companies exist in a marketplace for talent, capital and the valuable factors of production, and as the economics behind scale and scope shift, corporate collaboration and integration strategies will change. In short, “small” may be winning right now, but there’s no reason that “large” can’t catch up.
