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.
June 18th, 2009 at 8:52 pm
You speak entirely to the social and organizational aspects of the “corporation” and I agree that it is changing and has changed a lot over my working life of over 40 plus years. Another aspects of what sort of entity will evolve in the future is the legal, liability, regulatory entity that takes responsibility for the actions of an organized group. I have watched how that aspect has changed(mostly for the worse) the ways organizations/corporations organize them selves and even relate to other groups whom they are working with.
July 7th, 2009 at 8:01 pm
An advantage of a large corporation can be access to lower cost capital and the ability to wield political influence. Perhaps the ultimate example of such a corporation is ExxonMobi, a company that has the financial resources of medium sized country. Another example of capital and political influence is Goldman Sachs, which seems to have entered into a partnership with the US government.
There is always a tension between diversity and the ability to act quickly. Or between central control and distributed responsibility. There are successful examples of both. Both models will continue to exist.
The corporate world is the last bastion of feudalism, which is a “leadership” model that goes back to tribal times. The idealist might like to believe in a more enlightened model. However, this model has survived for millennia.
The corporation as a feudal hierarchy has run rampant in the United States, where corporate executives have been rewarded in a princely fashion and have pillaged the corporations they run like Barons sacking a city.
July 7th, 2009 at 8:12 pm
Regarding the early paragraphs of your post, addressing privacy and similar concerns.
I find it difficult to believe that company employees will not feel that a social networking tool, applied to email, is not a chilling example of a corporate “Big Brother”. I am careful to only use organizational email for official business, but still I would find this a bit chilling. The power of good graph analysis tools is that they can find topics of interest within a huge body of information. An employee could not be blamed for assuming that such a tool would be used to “spy” on them.
I have been looking for applications of graph analytics outside of investigative tasks (law enforcement, for example). There may be such an application in competitive analysis (in effect, corporate intelligence). But I don’t see this within a corporation. Or to, echo the previous paragraph, not without entirely creeping out the employees.
Perhaps the view is different in the UK (e.g., no one seems to object to all those cameras in London or the governments announced intention to apply massive data mining).