3 ways of
organizing

Part # 1 Part # 2 Part # 3
Hierarchies Democracies Markets
Source: Malone, Thomas W.: The Future of Work, p. 6.

Centralized Decentralized
Centralized Loose Democracies Markets
hierarchies hierarchies
Military Consulting Shareholder The Internet
Hospitals firms meetings
Many large companies
Part # 1 Part # 2 Part # 3

Part # 1
Hierarchies
Centralization

Characteristic # 1
Efficiency is key

Most important for efficient strategy execution
Source
The secrets to successful strategy execution. Harvard Business Review, June 2008.
http://hbr.harvardbusiness.org/2008/06/the-secrets-to-successful-strategy-execution/ar/1

Efficiency
Efficient and
Hierarchies innovative
business
Bureaucratic Innovative
company company
Creativity

Source: http://frankcalberg.blogspot.com/2009/07/management-dilemma-efficiency-vs-trying.html

Characteristic # 2
Power for decision making
is centralized at the top

Characteristic # 3
One-way flow of information and
commands from top to bottom

Command and control management
to establish as well as keep regularity
and predictability in operational work

Benefit of one-way communication: Time savings
By commanding, assignments are coordinated fast.
By commanding, conflicts are ended fast.
Source: Malone, Thomas W.: The Future of Work, p. 53.

Characteristic # 4
Specialization

Each worker does
specialized
operational assignments

Other examples

Analysts
standardize
work

Characteristic # 5
Standardization

Characteristic # 6
Structures and processes
are VERY important

Structure
Process Task

Plans, budgets, templates,
rules, and guidelines uphold
standardization and
specialization

Source: http://www.realinnovation.com/content/c090209a.asp

Problems of
the hierarchic
company

Problem # 1
An increasing number of customers
want products and services that are
special, different, individualized.

Problem # 2
A hierarchic company
is not efficient in the dynamic and
complex environment we live in

Low complex Complex
environment environment
Stable Machine
environ- Bureaucracy
ment
Dynamic
environ-
ment

Source: http://www.benckenstein.com/creativity/exponential-innovation-institutional-demise/

Source: http://www.slideshare.net/sniukas/organizing-for-innovation-growth-presentation

Efficiency Innovation
Source: http://www.vijaygovindarajan.com/2009/08/innovation_in_a_reset_world.htm

Problem # 3
Decision making is slow

Managers may become bottlenecks
due to information overload.
Source: Malone, Thomas W.: The Future of Work, p. 53.

Problem # 4
Fewer managers are needed
More and more people can manage
themselves, for example because they are well
educated and because they use Web 2.0
technologies to communicate with others.

Problem # 5
Command-and-control management
makes many people act reactively,
i.e. more or less like machines - and
stop thinking / acting proactively.

Lack of freedom prevents people from
following their interests, i.e. doing things which
may bring significant value.
People take initiatives, use their creativity, and
show passion only in their spare time.

Source: http://bigthink.com/garyhamel/the-problem-with-employees

Problem # 6
Spezialization prevent people
from doing more jobs
which could create more value
Source: Malone, Thomas W.: The Future of Work, p. 53.

Work becomes routine.
People lose the competence to think and act
creatively, try things out spontaneously etc.

”The old organizations are breaking down, because if
everybody is doing a well-defined task and job
requirements change, people do not know what to do
anymore – nor do their bosses.
And today’s fast-moving, competitive markets will not let
you hide this kind of ignorance inside your organization.”
Source: Abell, Derek F.: Managing With Dual Strategies, p. 129.

Problem # 7
Suboptimization

Some line managers stop thinking holistically.
They may stop ideas that could create high
value for customers.

Source: http://www.youtube.com/watch?v=UKl1pjhQJaI

The company becomes a number of department siloes.

Source: http://www.pixelio.de/details.php?image_id=316694&mode=search

The potential of Web 2.0 such as blogs and
Twitter is not sufficiently taken advantage
of to communicate across functions and
hierarchies.

Problem # 8
Owners/managers keep putting money into
old, slow growth strategies that were once
successful.
Resources are slowly reallocated from old to
new strategies.

Market Question marks Stars
growth
Try out ideas with Develop great concept
growth potential. further.
Poor dogs Cash cows
Fix, sell, or close Look out for new
down. “question marks” to
invest in.
Market share

Problem # 9
Many managers hire and keep the wrong people,
i.e. people who want to maintain status quo – not
people who want to change/renew.

Problem # 10
Many people do only what is written in
their individual contracts.
Consequently, collaboration suffers.

Problem # 11
Contractual relationships

More and more work is temporary / freelance /
non-career / flexible / part time / nonstandard.
Less and less careers are vertical careers within
one company.

In the business environment, we increasingly
live in, there is more focus on interests and
relations, for example customer relations and
relations between business partners.

More and more people solve assignments
for more companies / more people - not
only for one company.

Problem # 12
People stop doing what
they are really good at

People with high competencies in operational
areas are promoted to become managers.

Part # 2
Democracies

Source: http://www.youtube.com/watch?v=7edM7e9UXqs

Source:
”Harnessing the power of informal employee networks, 2007.” The Mckinsey Quarterly, November 2007.

Today, the average manager in Google’s product-
development group has more than 50 direct reports,
and for some leaders the number tops 100.
Source: Hamel, Gary: The Future of Management, p. 111.

Strengths of democracies
Individuals can participate in decision making,
for example by voting.
Group decisions can force individuals to do things
for the overall good.
Source: Malone, Thomas W.: The Future of Work, p. 70.

Weaknesses of democracies
Much communication required.
Everyone’s opinions count equally - even when
some people may be more competent than others.
Source: Malone, Thomas W.: The Future of Work, p. 70.

Software to help you make decisions

Part # 3
Markets
The Internet, small businesses

Markets
The Internet, small businesses

Hierarchies are natural, not prescribed
In any Web forum there are some individuals who command
more respect and attention than others - and have more
influence as a consequence. Critically, though, these
individuals haven’t been appointed by some superior
authority. Instead, their clout reflects the freely given
approbation of their peers. On the Web, authority trickles up,
not down.
Source
http://blogs.wsj.com/management/2009/03/24/the-facebook-generation-vs-the-fortune-500/

Example
Source: http://www.ideastorm.com/ideaView?id=087700000000H7WAAU

Tasks are chosen, not assigned
The Web is an opt-in economy. Whether contributing to
a blog, working on an open source project, or sharing
advice in a forum, people choose to work on the things
that interest them. Everyone is an independent
contractor, and everyone scratches their own itch.
Source
http://blogs.wsj.com/management/2009/03/24/the-facebook-generation-vs-the-fortune-500/

”What if many tasks currently done by large companies
were done instead by temporary combinations of small
companies and independent contractors? Taking this
idea further, what if most businesses consisted of one
single person?”
Source: Malone, Thomas W.: ”The Future of Work”, p. 74.

Source: http://www.realinnovation.com/content/c090209a.asp

Strengths of markets
Efficiency
People move to assignments where they
generate value for others.
Flexibility
Anyone can work on any aspect of the problem.
Motivation
High autonomy to decide things individually make
people work hard.
Source: Malone, Thomas W.: The Future of Work, p. 106.

20% of
the results
80% of
the time spent
80%
of the results
20%
of the time spent

Weaknesses of markets
Incentive problems
Agreements that would be good overall often don’t
happen because they are not in the self interests
of the parties involved.
Example: Free outdoor fitness centers in the middle of the city.
Communication needs
A lot of communication is usually needed.
Source: Malone, Thomas W.: The Future of Work, p. 106.

Few and weak Many and powerful
stakeholders stakeholders
Few
changes
Many
changes