Sample Chapter from "Bold
New World":
Chapter 9 -- " The Coming Amoebas"
|
See
also Chapter 11 on Terrorism
Themes
from Chapter 9:
|
Author's
note: Each chapter begins with a few fictional anecdotes to take you
into a real-world problem. That is followed by analysis as to why
the future will be as it will. Chapters close with a hook to the
next chapter. Look too for the natural resting spots every few
pages... just the place for a bookmark with an old friend.
-
--William Knoke
-
Note:
This chapter is based on original author's archives. The published version
may vary slightly
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Takashi
Kubota looked up from his mahogany desk out to the pool where his
grandchildren were playing. His
day-dreaming took him back to the days he left college; as a young engineer, he
was recruited into a giant kitchen appliance company with 12,000 employees.
His skill enabled him to rise quickly first as a team leader, eventually
with responsibility over 650 people.
However, Takashi was always frustrated at the
hierarchical rigidity of the company. It
took years to get new technologies
into old products; the marketing department would reject great ideas because
they “didn’t fit the existing product line,” or were “inconsistent with
our channels of distribution.” When
his boss finally told him to just focus on what he was asked to do, he decided
to quit to start his own company, knowing he could do better.
[chapter
outline] [book outline]
And, at age 58, he did.
He started Novaproducts with five hand-picked engineers;
all six were equal partners. In
eight years, his company’s revenues swelled to a fifth of his former
employer’s, with only two dozen employees.
His management philosophy was: have
as few employees as possible, don’t invest in expensive equipment, and
outsource everything. Novaproducts
coordinated the existing talent, production capabilities and market
opportunities that already existed.
Outsourcing—using subcontractors from manufacturing to
packaging, from administration and finance to marketing and sales—enabled
Novaproducts to use any technology, any
production method and almost any
channel of distribution, wherever it was in the world.
The key was to conceive the right products at the right time, and make sure the right people were involved and well coordinated.
Takashi knew that the emerging technologies of communications,
computers and high-speed transportation would tie his global network together.
The flexibility allowed Takashi to develop new products
in half the time it took his behemoth competitors; and by contracting with
manufacturers around the world who had the right tooling and idle capacity, he
was sometimes the lowest cost producer. His
experience taught him that the megacorporation would fall into extinction amidst
nimble competitors.
____________________
Sergio
Lombardelli was huddled in front of the green glow of his battery of
monitors.
Transfixed to the monitors like an adolescent at a video
arcade, his hands frantically fingering a music keyboard, he studied the images
of what would be the next model Ford WarpCoup xt.
Sergio, the leading automotive designer of his generation for Ford, gm,
Chrysler, Nissan, Volkswagen, bmw,
Toyota and others, had become one of the wealthiest 100 people in the world.
A disembodied voice boomed out from the speaker behind
him, “that’s good, hold that!” It
was Jean Rodin, from Ford’s design center in Cologne, Germany.
A second voice, that of a woman from Dearborn, Michigan, pierced the air
from another speaker to suggest a smoother flow on the tail fin.
On the screens, Sergio molded liquid metal before
everyone’s eyes, as designers, auto experts and engineers huddled over
Sergio’s shoulder electronically.
Sergio’s proprietary design equipment, combined with
his uncanny skill at creating award-winning designs, enabled him to see a car
from any angle. With his magical
keyboard, he could race the car down a mountain road, go inside and alter the
sheen on the beige leather seats, open the hood and change the “look” and
layout of the engine compartment. He
simulated crash tests to see how the structure would survive an accident.
As he altered the cosmetic features, his high-speed
computer systems were testing for best-fit off-the-shelf parts available from
worldwide auto vendors. As the
external appearance of the car shifted, the computer designed the underlying
parts, and detailed diagrams regarding assembly.
On the corner of a monitor, the computer continually tracked the unit
cost as the design changed.
Sergio worked alone from his fortress house outside
Siena, Italy. His state-of-the-art
system was build inside a vault high atop an ancient medieval castle.
As a backup, carefully encrypted copies of his “top secret” software
were kept in a bank vault in Lucerne.
When the design was accepted, Sergio snapped the
“send” key, and specifications of the body contours down to ashtrays and
harness wiring were downloaded to Ford’s computers worldwide.
Within seconds of receipt, Sergio was automatically transferred his
second $12 million installment for payment of yet another accepted design.
___________________
It
was with some trepidation
that Elizabeth McCrackern had quit her job as a graphic designer with an
advertising agency. Everybody loved
her talents, but the daily grind of her commute to work was killing her.
She was fed up with the rush hour traffic, with arriving drained, and
late, due to some unexpected accident or bad weather.
By the time she got out of work, picked up her daughter
at daycare and ate dinner, she collapsed in bed to get up early the next day.
Then, the bills were killing her:
no sooner had she paid for insurance and monthly parking fees, child care
and gasoline, that she needed to replace her brakes, or the entire transmission.
The day her car broke down and she couldn’t pick up her daughter after
work, she quit her job.
Lately though, she couldn’t have been happier.
The two hours a day she spent driving are now relaxation
or play time with Chelsea. The
money saved on commuting, child care and work clothes goes to pampering her
daughter.
Elizabeth set up office in a bedroom with the best
equipment she could afford, and continued design work for her clients at the
firm; even her ex-employer gave her new assignments. Between the electronic videophone, computer network and
same-day package delivery services, she got more work done than before—without
leaving her home.
She designs in the evenings and weekends without feeling
guilty for neglecting her daughter; and her growing list of clients, including a
few overseas, attest to her increased creativity.
____________________
Randy
Nadir’s attorney wasn’t sure
what they should do next. Randy’s
wife had died of carbon monoxide poisoning a few years earlier, due to a faulty
clothes dryer. The attorney had
identified over a hundred other victims who had died, or suffered permanent
brain damage, as a result of the bad device.
A class action suit of this scope would normally require billions of
dollars to settle.
Who should they sue?
The companies that installed the units were small, independent
distributors scattered everywhere; they had since gone out of business, some to
escape liability for the deaths. Records
showed that the “manufacturer,” Kenmarla Industries, was now a defunct
assembly operation that once worked out of a rented warehouse, assembling pieces
purchased from multiple offshore vendors. The owners used assumed names and were long gone.
The attorney acknowledged that none of the pieces
were faulty; the problem lay in how they were put together.
As for the offshore vendors, they had no local presence and were beyond
the jurisdiction of the law.
___________________
Welcome
to the wonderful world of the Fragmented Corporation.
In the last chapter, we have seen how the myriad forces
of placelessness are propelling organizations unwittingly onto a global stage.
Organizations will compete by combining the best talents and resources
from around the world, to produce the most innovative, cost-effective products
and services. In this chapter, we
unveil a seeming paradox: the
Placeless Society will favor organizations with a global view, but not large
monoliths. Quite the contrary:
the winning organizations of the 21st century will be highly
fragmented, “multilocal,” with minuscule corporate headquarters, or even
clusters of tightly coupled groups and individuals scattered throughout the
world.
Each division, department, and individual in an
organization will no longer be “subordinate” or “superior” to one
another, but will interact as a dynamic, ever-changing team focused on common
endeavor, and coordinated through the technologies of placelessness.
The role of the individual will be not unlike that of the cells in a
growing plant: each contributes to
the others and is necessary for the robustness of the whole.
Many of today’s industrial giants will have broken up
or hollowed out, overtaken by more agile forms of economic organization. We are on the edge of a new economic system whose very structure will be
unrecognizable to us in a few decades.
The Giants that we’ve grown up with, and accepted as
household names (IBM, General
Motors, Hitachi, Daimler-Benz, Proctor & Gamble…) are the icons of the 20th
century, the companies to emulate. Yet,
placelessness is methodically tearing them apart. What seemed initially to be a cyclical downturn, or some
idiosyncrasy of a particular industry, is in truth a broad set of structural
changes sweeping the world. The
giants are being replaced by a new species more adaptable than anything that has
preceded it in the evolution of corporations.
To understand why, let us look at how the giant corporate
structures evolved in the first place. The
large corporation became the role model to emulate in the Industrial Revolution.
The new textile mills needed power to operate, which they gained first
from water wheels, and later from steam engines.
Once these power sources were in place, various belts and pulleys
conveyed the power to a great many individual machines.
This in turn led to large concentrations
of people working efficiently under one roof, as different parts of the
production process required close interaction.
Industrialists began to grasp the rather new concept of
“economies of scale”: the
larger a textile plant, the more efficient and profitable it was.
In the ensuing competitive battles, the smaller enterprises were ground
under by their larger rivals. Bigger became equated with better,
and the paradigm of organizational Gigantism was born.
Gigantism got its second wind in the wake of World Wars i
and ii.
As each country prepared for battle, the centrally orchestrated command
and control style of the military campaigns translated into effective
mobilizations and powerful victories. When
the war ended, celebrated “Whiz Kids” like Robert McNamara and “Tex”
Thornton brought their command-and-control styles to the corporate board rooms
and business schools all over the world.
In parallel with the hierarchical management style,
corporations the world over kept growing bigger. The goal for many was to become a diversified
conglomerate—in Japan the zaibatsu—with
tightly centralized control.
Before the Placeless Society, the spirit of Gigantism
reigned; in the 21st century, the spirit of Individualism will
flourish. Overgrown corporations
are “downsizing,” spinning off unrelated business units, decentralizing.
Board rooms are yielding power to remote managers; corporate
“headquarters” are becoming anachronistic; middle managers are being
slashed. Corporate structures that
have evolved for over a century are being turned upside down, no longer managed
from above but from below, all the way “down” to the customer.
Technology is the reason.
Before placelessness, the best way to manage large pools of resources and
deploying personnel, was through very structured hierarchies.
Each person had a fixed role to perform, and groups were rigidly
organized under nearby managers. These in turn reported to other managers who reported to the
top boss, the one who decided the “war plan.”
Before the electronic age, rigid hierarchical structures were the
cheapest-if not the only—way to coordinate human resources.
Computers and communications changed all that, allowing
ad hoc teams of people to be assembled, organized, disassembled and reassigned
at will, depending on the task at hand. It
no longer matters where someone is
physically—a team can easily consist of an engineer in Germany, a programmer
in India, a marketing guru in California, and an accountant in Japan.
The important thing is that they be the best combination of people to
solve a particular problem. Once their goal is reached, the group dissolves and each
individual can be redeployed to another project.
The companies exploiting the technologies of
placelessness are simply able to beat their competitors who are not.
The behemoths that performed well in a static world are proving
unadaptable to a changing marketplace, to dizzying technologies and dynamic
consumer tastes. They are too
inbred, unwieldy, and cushioned from competitive pressures.
Hierarchy and centralized control is collapsing, bigger
is no longer better.
Take Ibm,
the hierarchical giant who “owned” the computer industry, supplying
large-scale computer systems to its behemoth clients.
In 1977, when Steven Jobs and Stephen Wozniak in 1977 started combining
off-the-shelf gadgets in a garage to form Apple Computer, executives at ibm
dismissed the new “desktop” computer as a useless toy.
But, as the “toy” began to steal market share from ibm,
ibm didn’t know how to react.
It had no “department” to deal with the new realities in the
marketplace.
Ibm realized
that their giant corporate hierarchy could never react to the growing Apple
threat. Thus, they set up an
“Independent Business Unit” with hands-off autonomy from the
corporate headquarters. Within a blitzkrieg
18 months, this autonomous group designed, manufactured, and got to market the ibm
pc. Its
success later caused ibm to
completely disassemble its hierarchy into scores of independent business units,
each operating with autonomy, but under the “ibm”
flag.
Corporations are preparing for the future by
decentralizing decision making. Gm
realized that, to produce an electric car ahead of its competitors, it needed an
autonomous team of 200 people to work outside its command hierarchy.
Well-run companies in the automobile industry are giving responsibility
to youth-led teams that even the ceo
cannot easily override.
Even the corporate headquarters, once the sacred citadel
from which marching orders were chanted, have been sacrificed to the gods of the
21st century. They are
often Lilliputian compared to the size of the whole operation, often limited to
the broadest of strategic decisions, leaving operating decisions in the
“field.”
When rjr
Nabisco, with 48,000 employees, moved its global headquarters to Atlanta,
Georgia, the city fathers expected an imposing skyscraper from which Nabisco
would rule its global empire. Certainly
it would be a boon to local employment. Little
did they know that Nabisco had already entered the Placeless Society with a
small staff of a few hundred people working out of leased space in a suburban
mall.
Switzerland’s Asea Brown Boveri—the world’s largest
producer of industrial equipment with 240,000 employees worldwide—has only 100
professionals in its Zurich headquarters. Swedish
ceo Percy Barnevik explains that
the Zurich headquarters are just where the mail arrives before important letters
are faxed to where he happens to be. But
the headquarters could just as well be in Chicago or Frankfurt—or nowhere.
Power is shifting so rapidly away from the center to the periphery, that
global enterprises will soon have no formal “headquarters” as we know them
today.
New age companies can have several global headquarters, with each business unit focused in a
different place. The head of
Hewlett-Packard’s personal computer business is in Grenoble, France. Siemens moved the head of its medical electronics division
from Germany to Chicago. Honda’s
power-products division is headed in Atlanta.
In the 1960s, the operation of multinational corporations
was simple to understand. Worldwide
headquarters were in one country, with all international operations bowing to
the central command. Products,
pricing, research and development, capital flows and markets were all centrally
determined. Foreign operations were
either set up to extract raw materials, exploit local markets, or to clone
successful business ideas from the headquarters’ country.
As commands flowed from the center to the periphery, profits flowed from
the periphery to the center.
In the 1980s, the world turned upside down.
Key elements of product design, manufacturing, marketing and finance
shifted to the periphery. But in
the everything-everywhere world, even the notions of
“center” and “periphery” became obsolete.
The Japanese refer to this phenomenon as to “glocalize,” to
McDonald’s, it is “multilocal,” United Technologies calls it
“multi-domestic.” Levi Strauss
has followed the mantra “Be global, act local.”
In most Japanese companies today, the head office often
makes decisions for product design and research, but local offices focus on
packaging, marketing and advertising. Japan
is most successful because it studies the global markets before designing a
product. Whereas Americans often
design products for a domestic market, then attempt to peddle them abroad, the
Japanese hone careful specifications to international standards, then focus
corporate and national policy to win acceptance in global markets.
Although the Japanese drive on the left side of the
street, not one of their standard
models shipped to America has had a steering wheel on the right side.
General Motors, Ford and Chrysler complain that the Japanese do not buy
American cars; they have been too slow to understand that a seven-foot wide
Buick with the steering-wheel on the curb side and a speedometer measuring miles
instead of kilometers has no appeal in Tokyo where streets are narrow and
parking is impossible.
Levi Strauss, the most globally oriented apparel-maker
headquartered in the us, has a
dozen facilities placed strategically around the world so that it can react
quickly to local fads. Its
marketing is left strictly to local managers who know the niche markets in each
culture. Best-selling fabrics,
colors and sizes in Germany and England won’t sell in Florida and California.
Brazilian women like tight-fitting Levi’s, the Japanese like them
loose, the Europeans buy them expensive. The
multilocal approach has paid off handsomely:
Levi’s foreign sales account for nearly two-thirds of corporate
profits.
United Technologies actively strikes local joint ventures
and partnerships, even acquiring family-run companies.
This approach allows ut to disappear into the
fabric of the country. Over
half its sales are foreign; of the 47,000 employees in its Otis elevator
division, only 7,000 are American.
McDonald’s, with 1990 revenues of $18.8 billion,
is a successful role model for the globocorp of the 21st century, as
it is well adapted to local environments. Its
9,000 locations in the us have
nearly saturated the country with one outlet per 28,000 inhabitants. In 1990, 80 percent of corporate growth came from abroad,
with 3,000 outlets in 53 countries. Two
to four new countries are added each
year. McDonald’s secret is that
it is multilocal: in the us,
it sells Coke; in France, it serves wine and cooks French fries in non-greasy
vegetable oil. Germany offers beer,
and the Philippines feature McSpaghetti. In
Japan, one can get chopsticks and green tea.
The company makes great efforts to find local
suppliers, partners and staff; fewer than 20 Americans work in the 3,000 outlets
outside the us.
While corporations decentralize and fragment, the
individual pieces are reassembling in
new constellations of power that will be the hallmark of the 21st
century: the pieces are forming
alliances with pieces from other corporations—even
their competitors. Boards of
directors in the last centuries would have shuddered at the thought of such
alliances, but they will be as common tomorrow as fax machines today.
Two factors are driving the alliances:
first, people and physical facilities no longer need be in the same place
to function. It doesn’t matter if
one’s coworker is in the next office, across the country, or
if she works for another company, only that the task get accomplished as
quickly and cheaply as possible.
The second factor is “technological obsolescence.”
The accelerated pace of technological development made possible by the
rapid exchange of information, means that any piece of technology must be
utilized right now.
Cutting-edge technology is as perishable as a truckload of ripe
bananas: it’s worth a fortune
today, but if not quickly used, it becomes worthless.
To fully exploit a new technology, a company joins up
with others, even competitors. The
new team has the necessary know-how, resources and marketing clout to get a
commercial product out the door before others invent a superior technology.
From the standpoint of each member of an alliance, it is better to have a
piece of a great project than no project at all.
The intense pressure to get the best product on the
market at the most competitive price drives many companies into “incestuous”
pacts. Joint ventures and ownership
are so widespread that it is difficult to tell where one company begins and
another one ends. For instance,
Ford Motor Company owns 25 percent of Mazda; Mercury distributes Mazda’s
Tracer designed by Mazda, but manufactured by Ford in Mexico.
Ford designed the Fiesta, but it is made by Kia in Korea.
Ford will use its Ohio plant to make a minivan designed by Nissan and to
be sold by both. In Latin America,
Ford and Volkswagen have merged operations to build trucks for exports—to the
United States.
For all the “buy American” fanfare put forward by
former Chairman Lee Iacocca, Chrysler is actually the least American of the Big
Three us automakers: it has the lowest percentage of American-made parts of all
the “American” cars, many obtained through joint ventures.
When Motorola wanted to build its industrious worldwide wireless
global telecommunications network known as Iridium, it knew it would be a
daunting task. To make the system
work, Iridium would have to juggle dozens of low-orbit satellites, innovate
leading-edge technologies, come up with extraordinary amounts of capital, and sell the services throughout the Americas, Asia and Europe.
And, it had to do it all in record time, before some alternative
system captured the market first.
Motorola could not build such a network on its own, but
found a solution in the Placeless Society:
It formed a consortium of a dozen partners such as Sony, Mitsubishi, Bell
Canada, Sprint, and groups from Russia and China.
The broad base gave Iridium access not only
to leading-edge technology but to foreign markets with a minimum of
resistance from nationalistic telephone monopolies.
Still more dramatic than the growth in strategic
alliances and joint ventures is the surge in “outsourcing,” subcontracting
to other companies, that corporations will experience in the near future.
Somewhere deep in Tatarstan (in the former Soviet Union)
is Kamaz, a truck manufacturer that could be one of the most self-contained
companies of its type. At one end
of the factory is dumped raw steel, glass, rubber and other raw materials; out
the other end pop road-ready trucks complete with windshields, tires, engines,
frames, doors and handles. Kamaz
still ascribes to the mid-20th century school where the goal of an
enterprise was to control even its sources of raw materials.
In contrast, Chrysler, one foot already in the 21st
century, purchases 70 percent of its materials from outside vendors. Chrysler’s
Concorde, Intrepid and Eagle Vision consist of only ten distinct sections:
Chrysler makes the engine, transmission and metal skin; outside vendors
make the other seven. The interior is in four sections: Textron provides the doors and instrument panels, Johnson
Controls produces the seats, and Prince provides the ceiling module.
The pieces come ready-assembled, ready to clap in place.
Subcontracting the pieces forces the subcontractors to
provide the most innovative technology at the lowest price to keep Chrysler’s
business. The subcontractors make
the product cheaper than could Chrysler in-house, since they make similar parts
for other automakers and can afford
the specialized tooling and r&d
that any single automaker would not find economical.
The advantages of outsourcing are such that automakers
will focus on what they do best—engineering, styling and marketing—and leave
manufacturing entirely to others who can do it more cheaply.
In the 21st century, the world’s automakers will no longer
manufacture cars, but merely snap together modules purchased elsewhere.
The manufacturing giants of today will become mere “snapufacturers.”
The trend toward modular manufacturing is firmly around
us today, yet few of us are aware of it. Computer
“manufacturers” like Dell of Austin, Texas, don’t manufacture a thing.
Outside vendors supply circuit boards, disk drives, components and
shipping boxes to Dell’s strict specifications, and Dell simply clicks them
together in its warehouse before shipping.
The Apple Powerpc is
actually delivered to Apple fully assembled and packed in a shipping box bearing
Apple’s distinctive logo from Solectron’s plant in Milpitas, California.
And ibm is moving in the
same direction.
One toy company, Gallob Lewis, takes the concept of the
“hypermodular organization” one step further.
It receives design ideas for new toys from outside entrepreneurs, then
sends the design outside to contract manufacturers who make the product and
package it. Yet another agency
dreams up the advertising and promotion. Outside
agents sell the product, outside vendors do the data processing and billing.
Outsourcing enables Gallob Lewis to do what it does best—the screening
of innovative ideas—and to leave others to their specialties.
The result: Gallob has sales
of $170 million with a mere 250 employees.
Riding ahead of the wave, a new class of companies
actively seeks outsourcing business. The
most famous is perhaps Ross Perot’s original Electronic Data Systems (eds),
a computer-service giant with close to $10 billion in revenues.
In a recent $3.2 billion deal, Xerox Corp. agreed to outsource its
critical computer and telecommunications operations to eds, transferring almost 2,000 Xerox people to eds.
The transaction allowed eds
to focus on what it did best; it provided better quality services for Xerox,
immediately saved Xerox money, and freed management time to focus on their core
business.
Seattle-based Stratos Product Development Group is also
ahead. Taking on tough design
problems, it provides a fully-engineered, ready-to-manufacture product to its
clients, in record time. When
Stratos tackled a portable workstation for Automatic Data Processing (adp), it got the job done in just nine months, compared to
two-years if adp had done it
in-house. Stratos provided British
Airways with an in-flight video-playback system, in three months-compared to
Lockheed’s one year estimate as prime contractor. Again, when Microsoft Corp. needed a design for their
BallPoint 2.0 mouse, Stratos did the job in less than a year. Each time, Stratos had the staff, equipment and expertise to
tackle state-of-the-art design problems in record turnaround time.
Listening to client specifications, they act, for each one, as an
in-house design team. That they are
physically remote from their clients
is of no concern to anyone.
A typical corporation, say Proctor & Gamble, has
numerous odd employees: data
processors, accountants, lawyers, mail clerks, cafeteria workers, janitors,
security guards, copywriters, artists, nurses and others.
While each of their jobs is important, in the fluidity of placelessness
their tasks will most likely be performed by “outsourcing” to third-party
entities offering greater efficiency and sophistication.
None of these personnel are central to the so-called “core
competency” of Proctor & Gamble, which is the design and marketing of
consumer products. Outsourcing to specialist contractors at lower cost would
allow Proctor & Gamble to better focus on its core business.
The reality of placelessness enables diverse groups from
different corporate umbrellas to work together in a common organization. In other
words, the corporation (the legal
entity that writes the paychecks) will be decoupled from the organization
(the working entity that creates wealth).
The implications of this are astounding.
As we will see later, these hypermodular organizations even call into question the role of the corporation that has been the
centerpiece of wealth creation in industrial societies for the past two hundred
years. We will also see that
these organizations render “irrelevant” much of modern financial accounting,
and—most significantly, undermine the very power of governments in regulating
economic activity.
But before getting into that, we need to examine the now
well-accepted collapse of hierarchy in corporations all over the world.…
The forces that are coalescing corporations into
hypermodulars are also tearing apart classical corporate structures.
The predominant corporate structure of the 21st century will
be scarcely recognizable to the industrial titans of the now-anachronistic 20th
century. The problem of course is the collapse of hierarchy as we have
known it.
In the “Classical Age,” the corporation was
characterized by hierarchy. Individual
power was determined by one’s position
in the hierarchy, not by one’s knowledge.
Each person had a boss, and each boss had a boss, some distant figurehead
that everybody read about and nobody saw.
The actual work
of the corporation was performed by so many pawns out in the field selling, or
in the factory welding, or in the r&d
labs designing. Policies and
strategy were set out by some ivory-towered group who coveted the offices with
the corner windows. In between, an
army of “middle managers” acted
as a conduit between what was happening
in the field and what was desired by
the top. The middle managers were
high-priced messengers who would ferry papers up and down the hierarchy, a sort
of all-purpose organizational lubricant keeping all the pieces moving.
With the advent of the technologies of placelessness,
this is all replaced by electrons. “Smart” computers, telecommunications,
videophones, overnight and same-day package delivery, collude to displace the
messenger and the coordination function once provided by middle managers.
In its place, nebulous teams, regardless of where
they are physically or which department
they are nominally assigned to, work on common problems.
The groups expand and contract organically, and each member is aware of
what the others are working on. If
some members don’t carry their own weight, everyone knows it.
If a person excels by superior knowledge, ideas, or natural leadership,
the group defers to her for guidance, regardless of whether that person is a
seasoned twenty-year veteran or a new engineer just out of university.
In this system, colleagues will no longer ask “what is
your position on the corporate ladder?” but “what can you do?”
Project leadership will be a constant “negotiation” of skills:
an individual on the “top,” due to knowledge relevant to the tasks at
hand, may have a tangential role on the next project, or participate in several
ones at a time. Teams may last for
years, or be disbanded and regrouped anew with high frequency. It all depends on what is needed.
The collapse of hierarchies and the mixing and matching
of resources from multiple companies allow us to sculpt at will organizations
that defy any description in place:
the placeless organization.
It can be a collaborative effort of a few people, or ten
thousand people, linked together via electronic networks enabling them to work
together in what computer junkies call “real time.” The workers can be in the same city, or spread in Manila,
Munich and Miami, yet because they are connected and aware of one another,
decisions are collective and collaborative.
Thus, there is no need for a “headquarters.”
In the extreme, the organization may have a contact with the outside
world only through a post office box, or everything-everywhere 800-number phone
lines.
In the mid-1980s, the placeless office would have been
considered a fictional notion, yet it has become mainstream among young, nimble
enterprises. The next decade will
see more companies like Telemorphix, an interactive tv
production company of 25 employees with no headquarters and no office.
Each person works from home, connected to a central computer physically
located at the president’s house. Employees
know who is performing and who is not, and often work on weekends and evenings
without leaving the house. The
company saves on office rental, the staff on commuting.
When needed, telephones, faxes and their in-computer network can set up
conferences within seconds.
Placeless corporations also exist in the form of tightly
coupled distinct corporations that act as one.
Mainstream businesses are already striving toward “virtual
manufacturing,” operations so tightly coupled with suppliers all the way to
the end customer, that it becomes irrelevant where one “company” ends and
the next “company” begins. Each
person concentrates on operating the whole chain of entities as efficiently as
possible.
Innovative companies like Levi Strauss and Rubber-Maid
are linking their computers directly to their retailers’ point-of-sale
systems. The manufacturer knows immediately
when an end-user purchases a size-8 pair of blue overalls, and instantly
adjusts cloth purchasing, production and delivery schedules accordingly.
The early information also gives Levi Strauss advance warning of trends,
and of how effective its regional advertising is. By merging manufacturing and retail operations, both become
more responsive, agile and profitable.
Some companies are so adamant about the strategic
advantage found in the Fourth Dimension that they will not do business with
those who don’t make the journey with them.
The British supermarket chain Tesco won’t buy from suppliers who are
not a part of its expansive computer network that links each store to suppliers
electronically. The system tracks
inventories, makes automatic orders, provides three-month forecasts, even pays
the vendors—all automatically—and choreographs 1,200 diverse companies to
act as a sole, highly streamlined organization.
The placeless organization will soon become mainstream as
competition pressures corporations to enter the Fourth Dimension.
Because the new form is so distinct from the classical “Corporate
Form,” the challenge in the early 21st century will be in
establishing new paradigms for strategy, management, organization, finance and
regulation. The emerging form of
organization is distinct form anything we’ve seen before; it takes
hypermodularity to the extreme in breaking components down, even on occasion
down to the individual person; and it is for the most part ignorant of place.
We will call this new form of organization the “Amoeba
Form” because, like the jellylike blob of cytoplasm seen under the microscope,
it is amorphous, changeable, conforming in shape to its environment; it is
difficult to distinguish its boundaries, where one ends and the next begins.
When an amoeba grows past a certain size, it merely splits in two, each
going its own way.
Clearly, the Amoeba Form will invade some industries
faster than others. It is built on
the premise that people no longer need to be physically together, or under the
same corporate umbrella, to work together.
Resources can be mixed and matched on an infinitely dynamic, ad hoc way,
to create economic wealth. And
because the Amoeba Form can grow and shrink to fit the problem, and adapt to any
challenge, it will prove superior to any corporation with ossified
bureaucracies.
Placeless technologies, by allowing anyone to work directly with anyone
else, has completely redefined the nature of
“market.” Markets are
places where “buyers” and “sellers” come to get matched up. We all know about the markets for products, stock markets,
commodity markets, financial markets, labor markets, even marriage markets.
With the advent of low-cost placeless technologies, we now have
“organizational markets”—places where resources, ideas, people and
opportunities can merge, match and rematch in ways unimaginable ten years ago.
Stanley Baldwin, the three-time Prime Minister of Britain
in the early 1900s, remarked that, if there was one lesson from history, it was
that society moves from status as measured by rank, to contract where market
value is the key. We have seen this
in the political realm where feudalism fell way to mercantilism, and later, when
the economies based on markets thrived over the centrally controlled ones.
In this context, where even the once-mighty Soviet Union
has collapsed and politicians are touting the advantages of market economies,
the one place where socialism and a command economy still rules is in the
largest worldwide corporations. Too
many are still buried in central planning.
Their mbas decide what “prices” ought to be, what gets produced and what does not, how many people
to employ where, what capital equipment to purchase and from whom, who will get
promoted, who will get sacked. The
hierarchic form is rich in misunderstandings, with little choice for affected
participants.
For all their good intentions, the corporate planners and
the Soviet central planners suffer the same handicaps:
lost is the individual entrepreneur; buried are the brilliant ideas
germinated in the trenches; unknown are the fine details discovered organically
in the field; unnurtured is a new technology used in a novel, or seemingly
“crazy” way.
For this reason, forward-looking corporations have
already introduced “markets” within their umbrella, and decentralized power.
“Intrapreneurs” are allowed to be creative and autonomous,
departments are treating one another as customers and suppliers, managers are
given the freedom to “outsource,” even when the capability is available
in-house. Everywhere, markets are
replacing hierarchy.
Shifting toward the Amoeba Form organization does not
just affect the companies involved, but indeed transforms the very structure of
the economy. Any of the resources
of our 20th century
economy are consumed on place: office
buildings, carports, highways, cars, gasoline, auto insurance, even retail
stores. Once organizations become
decoupled from place, most of these
expenses disappear. So do the
supporting industries: janitors,
building maintenance, gasoline-station attendants, office space, secretaries,
heating bills and the construction worker.
While the effect is displaced workers who must scramble to hone new
careers, society becomes much more productive and streamlined.
In the end, the societies first able to weave their multiple enterprises
into the realm of placelessness, will be the most productive and wealthiest in
the highly competitive global economy.
No culture can move there overnight; the transition will
be slow and awkward. In making the
shift, the us has some key cultural
advantages such as more desktop computers and telephones per capita than any
other region on the earth. Its
strong entrepreneurial and individualistic culture, and a natural inclination to
disregard hierarchy in favor of ability, are essential traits to make the Amoeba
Form organization work to the fullest.
In contrast, European society works against
entrepreneurial spirit, is suspicious of personal profit, and respects age,
title, position over raw ability. The
Germans in particular have a rigid code of hierarchy that pervades their
culture. All of this runs contrary
to the free-form fluidity required of amoebic organizations.
The Japanese have a strong teamwork approach to problem
solving, but their culture often thwarts individuals who seek to stand out.
Until recently, the Japanese have favored fixed-term jobs with a fixed
constellation of work colleagues for life.
This contrasts sharply with the transient nature of the Amoeba Form.
Ironically, despite their genius in designing things electronic, the
Japanese have surprisingly few desktop computers in their households, and even
office e-mail is not that
pervasive.
Despite the certain advantages of its culture, the us
is also severely handicapped. The us
educational system—so vital to the abstract problem solving of the Amoeba Form
of organization—is sorrowfully unprepared for the challenges ahead, and ranks
at the bottom of industrialized societies.
Even more problematic, the us
culture is lawsuit happy; instead of solving contractual disputes by compromise,
Americans are too quick to enter costly legal litigation.
Because the Amoeba Form is contracts—and millions of them—the us
legal system and culture need a major overhaul.
The us may
be in the lead entering the Fourth
Dimension, but without a comprehensive shift in industrial policy to better
fertilize the nascent Amoeba Form, the race with Europe and Japan will be close.
The Corporate Form
has to fall because its original purpose has run its course.
Law students are fond of defining corporations as charters granted by the
government for a specific purpose: an enterprise becomes a “person” who can
enter contracts, sue and be sued, pay taxes, etc.
In English law, corporate charters were first granted by the King to
limit the liabilities of the owners—if an exploration company hit the
rocks, the loss to the owners would be limited to their investment; nobody was
going to take away their family estate. Charters
grew in popularity with the Industrial Revolution as the method of choice to set
up a business enterprise. Today,
they are de rigueur all over the
world.
But does the Corporate Form limit liability, or
does it magnify liability?
Is not a corporation, particularly in the us,
viewed as a large pot of money to be sued?
Civil attorneys delight when they can weave a large corporate litigant as
a defendant into a big-claim lawsuit, no matter how remote their actual
responsibility. If a driver is hurt in an auto accident, sue General Motors
for a safety lapse; if a person is sick from asbestos poisoning, sue the
Manville Corp.; if it’s lung cancer, sue Philip Morris.
Clearly we should hold
corporations accountable when they are responsible. But can we expect the captains of industry to set themselves
up as targets?
Is not the Corporate Form also an easy target for
government regulators to effect controls on whatever suits them—taxes,
pollution controls, affirmative action, environmental cleanup, safety
regulations, and on and on? While
governments necessarily amass regulations to control society’s destiny, it is
the omnipresent Amoeba Form that will provide the escape valve for business.
Over the next two decades, business strategists will
question the wisdom of the Corporate Form, which will be seen as a lightning rod
for lawsuits, government regulations, unionists, perhaps terrorists.
The worldwide shift to the Amoeba Form will call for fresh challenges for
governments everywhere.
Unfortunately, the governmental structures that have
evolved over the past two centuries are not equal to the task.
Because of its decentralized, ever changing structure, the Amoeba Form
will be uncannily unwieldy for regulators to get a handle on.
Lest there be any doubt, one only needs to look at one industry that
comes closest to the Amoeba Form, that operates in every large urban center in
the world, and is infinitely adaptable to changing market conditions.
Unquestionably the most profitable industry on the globe, with estimated
retail sales at over $500 billion a
year worldwide; it is the illicit drug trade.
The drug industry is as complex as any other, perhaps
more so. The cocaine sector alone
is believed to “employ” as many as 1.5 million people in production as growers, harvesters, laboratory processors, buyers,
pilots, accountants and gunmen. An
additional uncounted army is involved in distribution:
smugglers, regional distributors, retail sales agents, and money
launderers.
The worldwide drug network has many characteristics of
the Amoeba Form. While some
clusters of individuals in the drug industry are more powerful than others, the
notion of a highly organized “cartel” is exaggerated in the press.
In reality, the industry is highly fragmented and decentralized as each
individual (or cluster of individuals) is an autonomous “business” that
provides specific services to other industry participants.
The network operates by market forces, and is governed by its own code of “ethics,” verbal contracts and internal self policing.
So tightly choreographed are all the independent
“contractors,” that together they create the appearance of a single
megalithic organization. Law
enforcement agencies and the press like to think that, once the “top
ringleaders” are crushed, the whole network will tumble.
However, the Amoeba Form is the most resilient of economic organizations:
no sooner does the government cut down one operation than two more
emerge, like Hydra heads, to take its place.
There is no top or bottom, only a flexible network.
Conforming to new realities at once, it alters supplies, transportation
corridors, shipping “containers,” prices and distribution tactics, in a
hostile environment.
The lessons to government regulators are as clear as they
are frightening: if the
technologies of placelessness encourage the Amoeba Form in mainstream
industries, how will rules be enforced? Gone
is the single address to knock on where the ceo
has to speak for 20,000 employees, or two dozen manufacturing plants.
In its place are hundreds, thousands of
“amoebic clusters” that can, if need be, slip out of existence
overnight to reemerge somewhere else. The
fluidity of the Amoebic form makes it difficult to pin responsibility for
environmental regulations, product liability, taxing and auditing.
It is precisely for this reason that the drug industry evolved toward the
non-hierarchical Amoeba Form.
In the Amoeba Form it is virtually impossible to pin
“responsibility” on any large corporate body, because none exists.
Today, it is hard enough to prove that, say, a feminine hygiene product
caused cervical cancer. But what if the same item were produced under the Amoeba
Form? What if thousands of tiny
one-person “companies” networking together were involved in the conception,
design, testing, manufacturing, quality assurance, packaging, warehousing,
advertising and distribution? Which
one would be responsible for the cervical cancer?
All of them? None of them?
And what if they were too small to have any significant assets, or they
just closed the door and went out of business?
In the new reality of the 21st century, global
“organizations” under the Amoeba Form are so fragmented that they will prove
nearly impossible for nation-states to regulate. Governments still immersed in the Third Dimension will be
outmaneuvered at every turn by commerce operating in the Fourth.
For this reason, the first two decades of the 21st century
will likely see a frenzy of unfettered global capitalism, until governments can
catch up.
The shift to the Amoeba Form, and the ability of diverse
people to work from their homes, will also occur at different speeds for
different industries. The most
affected industries will involve one-on-one client interaction in the field:
insurance adjusters, field sales personnel, real estate agents, retail
stock brokers. Next will be
industries where groups of professionals work together to solve specific
problems: accountants, lawyers,
architects, graphic artists, computer programmers.
At another level will be the information intensive industries:
government, sales orders, customer service, teaching, insurance,
Clearly, the industry least affected is one where the
work has to be performed in
situ due to the practical limitations
of physicality. These laggard industries—mining, shipbuilding, automobile
manufacturing, janitorial services and equipment repair—are nonetheless likely
to become “amoebic” in that the “value chain” will increasingly fragment
and specialize.
Some corporations will make the transition into the
Fourth Dimension better than others. In
some instances, we don’t yet know how to transform staid, hierarchic
enterprises into a streamlined Amoebic organization.
Some are spinning off businesses outside their “core competency,”
others are breaking up internally, giving full operational autonomy to
divisions.
Such breakups are in the right direction but too often,
the division managers brought up in the school of the 20th century
corporation, stop short of making a full transition to remove the next layers of
hierarchy. In truth, any department
or individual should be free to “contract” services elsewhere, and the
“price” of services provided in-house should be explicit. If the business and product make sense, the various
“departments” should move in sync as a team.
The forward looking manager will identify the
organization’s “core competency”—what they do best in the world beyond
anyone else, and redefine the business’s raison
d’être around that core.
Employees, tasks or departments that are not in the core area
might better be outsourced. In some
cases, existing departments can be spun off as “independent business units”
supercharged by employees who now have the magic of ownership, and the incentive
to make a difference.
As for the areas of core competency that remain, the wise
executive will seek “amoebic” relationships with other entities, even
competitors, to leverage that competency to the fullest.
It was this principle that pulled at&t
from being a telephone company to become a credit card company:
At&t’s core competency
was transaction processing combined with a world-class brand name associated with
integrity and reliability.
Our society will not leap
to the highly fragmented Amoeba Form, but evolve there.
Some of us will be affected overnight by a closing factory overcome by
more nimble competitors. Others will be tossed into old familiar jobs now conducted on
an unfamiliar keyboard: the
manufacturing workers whose instructions come on a diskette, the personnel
director who needs to scan a database to find the right talent, the salesperson
who places orders by modem on a car phone.
We will all be affected differently.
But we will all be affected.
Our inexorable shift away from the Corporate Form toward
a free-flow Amoeba Form will call for new skills on the job market.
Managers will face particular changes:
the importance of title and position will erode.
The new leaders will no longer be like ship captains but candidates
running for office. In the evolving
market-based organizations, they will be masters at negotiating, at
“selling” ideas to others, putting the right teams together and getting them
enthused. (As we enter the 21st century, we’ll witness a
steady rise in the popularity of books and courses on the art of negotiation and
team motivation.) The skillful
leaders will also get people to reach a consensus, and resolve disputes before
they flare up.
Decentralization works best with self motivated and self
policing individuals. The
successful Amoeba Form workers will be able to see a problem and figure out
solutions on their own, without being told what to do (those jobs can be
automated).
Our vocabulary will change. To be “at work” will no longer describe a location but an activity.
To be “at the office,” could mean at home, in the car…or a cellular
phone at the beach. Place
will no longer be relevant, as long as the work gets done.
In the 21st
century, more people will work autonomously; no one will be there to “watch”
them. As a result, the emphasis
will shift from the motions of work to
its result. Individuals involved
in the Amoeba Form of organization become like a corporation under the Corporate Form: they are valued and compensated on the quality of their
output. They
become service workers, whose service
is adding value to a physical product (as an automobile-assembly worker) or to
the group (as an insurance adjuster). They
may have one or more “suppliers” and one or more “customers,” but either
way, everybody is a “client.”
New, market-based compensation systems will evolve.
In the old economy, “job slots” were often paid within rigid limits:
two secretaries would earn the same income, even if one was far superior
to the other . Assembly workers of
the same seniority would get identical pay regardless of creativity,
consciousness and contribution. The
system was interested in easy measurement (the number of hours) and paid
accordingly. A “bonus,” always
fit within a tight predetermined range designed to be a small fraction of the
base salary.
In the 21st century, more people will work
autonomously; no one will be there to “watch” them. As a result, the emphasis will shift from the motions
of work to its result.
Individuals involved in the
Amoeba Form of organization become like a corporation
under the Corporate Form: they
are valued and compensated on the quality of their output. They become service
workers, whose service is adding value to a physical product (as an
automobile-assembly worker) or to the group (as an insurance adjuster).
They may have one or more “suppliers” and one or more
“customers,” but either way, everybody is a “client.”
New, market-based compensation systems will evolve.
In the old economy, “job slots” were often paid within rigid limits:
two secretaries would earn the same income, even if one was far superior
to the other . Assembly workers of
the same seniority would get identical pay regardless of creativity,
consciousness and contribution. The
system was interested in easy measurement (the number of hours) and paid
accordingly. A “bonus” always
fit within a tight predetermined range designed to be a small fraction of the
base salary.
In the Amoeba Form, our compensation will not be related
to the number of hours, but to the value of our work to the collective
effort. Contracts will resemble those of rock stars or movie
celebrities who are compensated according to their likely impact on ultimate box
office revenues, or who are paid a royalty based on the commercial success of
the end product. Bill Gates at
Microsoft already pays his top programmers “celebrity” salaries, plus a
“royalty” on the sales of the products worked on.
He knows that good talent can make or break a product; if he doesn’t
pay accordingly, someone else will. In
the Age of the Amoeba Form, talent goes to the highest bidder.
The reward for superior talent will define the job market
of the 21st century. In
the command-and-control economy, the creators of organization extracted
extraordinary profits from the value chain:
the suppliers of raw materials, workers and capital providers, were
largely compensated at “standard” rates based on prevailing commodity
prices, wages, and interest rates. If
the entrepreneurs put together a well-tuned organization, the “excess”
profits would go to the entrepreneurs—the organizers.
In the Amoeba Form, they and the workers are likely to be one and the
same.
It is also noteworthy that clusters of individuals will
work on a particular specialty and link up with other “clusters.”
One group may be involved in package design, another in manu
facturing,
yet another in distribution. A
talented individual may earn an extraordinary income.
In the 21st century, income will be less apportioned to
provide a “decent wage” (with upper and lower bounds), and more apportioned
to talent, energy, ability and contribution.
This is good news for the talented and the hardworking—and those
endowed with cutting-edge technological tools, yet disastrous for those in the
Second World—and others—without marketable 21st century skills.
____________________
We have seen the
forces of everything-everywhere dramatically restructuring our economy.
Now, in the next few chapters, we shift our attention to the breakdown of
the most powerful force that has ever evolved in modern history:
the nation-state.
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