Read this post in: French
Last few months were, for me, pretty insightful. I tried to spread and nurture some ideas about organizations, collaboration and complexity, met people, chatted online with others, read, assisted or talked at events… The last pebbles of wisdom came for The Age of Paradox, from Charles Handy, whose S-curve metaphor quasi magically fitted my intuitions. Little by little, I have now built a somehow practical model of organizational maturity which drastically shows the need for enterprise to step into the 2.0 world.
Phase #1: the simple enterprise
Most companies start simple, with a few people gathering their skills on an idea. Decision making, tasks assignment and direct interaction with clients and all stakeholders are straightforward. As every entrepreneur knows, initial company’s growth is often a synonym for efficiency drop and P&L decrease, since administrative tasks, indirect structural costs and middle-term forecasts add financial and human pressure on its early development.
Overcoming these obstacles is one of the main burdens of start-ups and young businesses. Innovation sparks, knowledge capitalization is eased by a common vision on business, and further growth usually stands for sustainable efficiency and market shares increase.
Phase #2: the complicated enterprise
As organizations grow in size, original simplicity gets harder and harder to maintain. In The Pursuit of Wow, Tom Peters considers the ideal size of organizations to be around 150. Beyond this size, knowing everybody in person becomes impossible (think about the Dunbar number, which has the same value), and intermediate layers of power and delegation begin to develop. Beyond this phase, whether they want it or not, to go on growing, most companies enter the complication realm.
Most today’s big companies and groups are complicated. To afford growth and efficiency increase, more and more processes are setup to ensure reliable operations and risk mitigation, thus relegating the core competencies of decision making and innovation to the periphery. The vision, if any, is now supported at board level, no more at individual level. New layers of control and supervision appear, silos are created and knowledge acquisition is formalized as an attempt to gain efficiency through specialization.
As big companies get bigger, unless sustained by a never-ending expanding market, internal growth and innovation reach a tipping point, and companies rely on mergers and acquisitions to keep on steadily growing. As a matter of fact, at some stage of complication, companies do not create jobs anymore. In France, a study from INSEE showed that big organizations and groups rather destroy internal jobs; they transfer them to subsidiaries, contractors and subcontractors, and, even this way, only very barely participate in job creation. Similar studies, conducted in other countries, showed the same results. Knowledge, and acquisition of new knowledge, are still a key factor for innovation and efficiency. To compensate for the fact that it cannot be brought in by external stakeholders anymore, the complicated enterprise shifts to another organizational paradigm, and becomes a learning enterprise, putting an overall important effort into training.
Threats to the complicated enterprise
What we are witnessing today in most business sectors is the inability for big companies and groups to reinvent themselves fast enough to cope with the threats they are now facing. Optimization of business processes and costs reduction only marginally affect organizations’ efficiency and growth. Faster evolving markets challenge organizations’ ability to react to customers’ demand, and to reorganize internally accordingly. Decision making is more and more paralyzed by process-based operations and chains of control, thus affecting companies’ agility.
Furthermore, organizations now have to face important internal challenges. Baby boomers, once the lifeblood of business, are now retiring at increasing rate, depriving companies of crucial knowledge and expertise. At the other end of the population pyramid, Generation Yers are today experiencing a totally new experience in the way they communicate and interact. This isn’t about tools, about technologies and the way they use them. The internet is radically changing their and our lives, enabling a radically different perception of ourselves, transforming the very nature of information, challenging hierarchies, management and workflows.
Without a shift, complicated organizations will soon enter a delusional phase, leading to increased efficiency loss.
Phase #3: the complex enterprise
To answer these threats, organizations need now to embrace complexity, instead of persisting into increased complication. I already wrote about the necessary shift they need to undergo to harness the power of networked collaboration, to step from hierarchy to wirearchy, as Jon Husband defines it. This paradigm’s shift comes at a cost; while present organizational strategies still show efficiency improvements, the challenge of adopting Enterprise 2.0 concepts and practices will necessarily see it dropping for some time. Coexistence of both structures will not ease things out, until companies get a clearer view of the new induced competitive advantages.
Here is an attempt to summarize some key organizational changes involved during the journey from simplicity to complexity:
|Organizational Theory||Knowledge-Based View||Learning Enterprise||Micro-Foundations of Dynamic Capabilities|
|Attractors||Stakeholders (vision)||Shareholders (wealth)||Clients (service)|
|Knowledge Acquisition||Formal Training||E-Learning||Social Learning|
|Knowledge Capitalization||Best Practices||Good Practices||Emergent Practices|
Future doesn’t belong to complication, and simplicity is far behind most companies. Pioneering Enterprise 2.0 is a bold, but soon to be unavoidable, step into business redesign.