While mobile, cloud, BYOD and other trends are racing into the enterprise, there is a lot written about what these technologies are improving in the enterprise, and how IT has to adjust to deal with these changes. But very few people are writing about how these changes in communication are affecting organizational structures.
Organizational structures are based on lines of communication. In the past, most organizations were hierarchical.
Figure 1 – The Hierarchical Organization
Hierarchical structures have the advantage of being very stable and work well in stable environments. Like the men on the assembly line reporting to their manager who aggregates their information, does some analysis and reports it up the chain.
However, I would say the environment we live in is anything but stable. The environment is unstable, the Internet has changed both the speed and distribution of communications, and with everyone having a camera in their phone, there not only is a tidal wave of information, but it is coming at us from every direction.
One of the ways organizations have adapted is to become more mesh-like, creating temporary hierarchies as needed, much like a fishnet or a matrixed organization.
Figure 2 -- The Matrixed Organization
This is a very flat structure where there are cross-functional teams and people reporting to at least two managers who are both responsible for the progress of a project. The downside of a matrixed organization is also its strength. Matrixed organizations are much more able to react quickly. However, in a stable environment a bureaucracy is much more efficient.
Figure 3 -- The Fishnet Organization
A fishnet organization is really a temporary and flexible hierarchy. The Internet has evolved faster than any other human endeavor has done because it is not a hierarchy. This organizational structure has the advantage of temporary centralization and it grows from the edges just like the Web does. If you imagine this fishnet floating on the waves, the waves are the flow of changes that are continuously happening to us at an ever increasing speed.
The Networked Organization and the Mobile Revolution
There are more mobile phones on the earth today than any other computing device. Tablets are replacing PCs and most collaborative software can now be found in the cloud.
As I said earlier, the way we communicate will affect our organizational structures. Hierarchical and matrixed organizational structures have been around for many years, but what new technologies, especially mobile, have done is enable us to work anywhere, anytime and with anyone. This has some interesting implications for organizational structures of today and tomorrow.
Many visions of future organizations have IT as an outsourced department (see figure 4). This is called a networked organization which contracts out any business function that can be done better or more cheaply.
This type of organization has a small core, say 200 people that deal with: company management, marketing, product management, R&D, operations and coordination of outside contracting groups for IT, HR, Sales and supply chain. Many of the other departments may be outsourced to other organizations that have proved their merit and have longstanding relationships with the core.
This is the “networked organization” which could not be implemented without mobile technologies. Each of the satellite groups to the core can be other companies or independent contractors. What is clear is that there is a close and long-term relationship between them.
This type of organization is based around communication, and can be very agile, its characteristics also allow for some stability and lower costs. All of the groups networked with the core are responsible for their own insurance, employee benefits, etc. This leaves the core to focus on the task of getting critical products and services out into the market, and the ability to get the messages about these offerings out quickly.
Figure 4: Future organizations will outsource, HR, IT, Accounting and many other functions
A good example of this comes from John Seely Brown and John Hagel's writing on the Chongqing Motorcycle company in China. Many Chinese business men would meet in tea houses, forming informal social networks. Some of them realized that they were making sub-systems for Japanese motorcycle manufacturers like Suzuki, Yamaha and Honda, and that by combining their sub-systems they could make a motorcycle that would be better, less expensive and incorporate more new technology and innovation.
These process-oriented networks are called “localized modularization” -- a loosely controlled, supplier-driven approach that speeds up time to market, cuts costs, and enhances quality. The heart of this new system is a series of process networks mobilizing specialized companies across many levels of an extended business process... The private assemblers refined the Japanese companies’ tightly integrated product architecture into one that was more flexible and modular but just as functional. The Chinese system makes it possible for the assemblers to modularize production in parallel by outsourcing components and subassemblies to independent suppliers... The suppliers take collective responsibility for the detailed design of components and subsystems. Since they are free to improvise within broad limits, they have cut their costs and improved the quality of their products quite rapidly."
China now accounts for 50 percent of global production of motorcycles. Their average export price has dropped from US$ 700 in the late 1990s (already several hundred dollars less than the cost of equivalent Japanese models) to under US$ 200 in 2002. They have gained 60 percent of Honda’s motorcycle share in the Vietnamese market.”
This is an apocryphal tale, not only about how networked organizations and their mobile technology underpinnings can produce more quickly and more cheaply, but that China rather than the US is becoming the global center of management innovation. They are pioneering management techniques that most US companies don’t even understand yet. Because they are new, they can use technologies like mobile and social networks as a way to define their business in the Post-PC era.
Editor's Note: To read more by David Coleman:
- What is Web 3.0, and Why Do You Care
- The Evolution of Collaboration and Online Communities: Measuring What Matters