Blog | Archive for June, 2009

Loosely-coupled organisations & the death of corporations

By Charles Armstrong | Monday, June 22nd, 2009

Over the last three months I’ve been doing a lot of presentations to IT and HR leaders about understanding and working with informal structure in the enterprise. My talks usually provoke a barrage of questions about privacy, inter-generational behavioural divergence, the potential for employees to “game” automated analytics and so forth.

One thing that’s surprised me is the number of senior executives who ask whether i think large corporations will exist in fifty years’ time, or whether they will be eclipsed by new types of economic player. This isn’t such a wild-eyed question as it might appear and I find it encouraging that people have the confidence to ask it. The modern public corporation only appeared at the end of the nineteenth century and secured its position as the dominant global actor during the first half of the twentieth century, displacing the private family-run business. Through history the baton has passed from one model to another reflecting changes in markets and technologies.

There are huge forces at work that threaten the corporation’s position. In the world of software highly distributed open-source development models have proven their ability to compete with concentrated proprietary approaches. The web has enabled collaborations that are significantly more agile and responsive than corporate structures. Meanwhile the web has also changed the relationship between producers and consumers to enable smaller providers to access large markets that would previously have been inconceivable. However I think it’s premature to write the corporation’s obituary just yet. It has evolved continuously over the past century and it may yet adapt sufficiently to prosper in the new world. The interesting question is whether it will be able to adapt fast enough.

I believe the twenty-first century’s most characteristic organisational structure will be a fluid and loosely-coupled federation of small groups and individuals. Functional coalitions will form around opportunities and evolve as circumstances shift. At any moment an actor is likely to be involved in multiple coalitions and the balance will constantly shift in line with demands. Entities of this kind will have the edge over corporations because they will be able to deploy resources much faster and more efficiently around new opportunities and changes in the trading ecology.

Such loosely-coupled organisations will only come into being once the financial, operational and legal mechanisms that currently involve manual document-based processes are transferred to being automated and electronic. Examples include legal structures, inter-agent contracts and remuneration systems. The kind of analytics which Trampoline provides will be essential infrastructure for the management and coordination of such complex trading communities. I’m also involved with an open source project called One Click Orgs which is starting to chip away at some of the legal structure and governance aspects.

As these new automated mechanisms become available forward-thinking corporations are going to start adopting them to increase agility. I think we will see some large corporations evolving to become more decentralised and operating in a way that’s increasingly similar to the loosely-coupled model i’ve described. Such corporations will gain some of the benefits of increased agility and responsiveness of the loosely-coupled organisations, whilst they will continue to possess the power of “diktat” over large-scale resources that the loosely-coupled orgs lack. This process of evolution will not be straightforward however. It will require some deep-seated cultural and strategic changes, not just the implementation of new technology. But I am sure some corporations will succeed in transforming themselves in this way.

In conclusion I do not believe the large corporation as we see it today will exist in fifty years’ time. But we will see a convergence with some corporations becoming more fluid and decentralised on the one hand, whilst networks of small businesses become more structured and economically significant on the other.

I’d love to hear other people’s thoughts on this if you feel like writing a comment.

Posted in Organisations & Technology | 3 Comments »