It's been two years since Dave Gray published "The Connected Company" with Thomas Vander Wal. Since then, the disruptions to the marketplace noted in the book have only accelerated. But companies are still struggling to keep pace.
At the time of the book's release, Gray noted a lesson from evolution -- organisms must evolve with their surroundings or risk extinction. It's a lesson many businesses have learned the hard way.
How to Work Like a Network
We reached out to Gray to find out what it looks like to "work like a network." Gray, former senior vice president of strategy at Dachis Group (since acquired by Sprinklr), now acts as founder of the business design consultancy XPLANE, where he focuses on the challenges of driving innovation and change in large organizations.
Fagan: How would you define “working like a network”?
Gray: Most organizations are formally organized as a hierarchy. The org chart is a kind of tree, where branches represent different functions. The formal org chart is an idealized picture of the way work is organized. But in reality, people don’t like to be controlled, and every formal hierarchy is resisted by a kind of shadow organization that resists and subverts it.
In addition, a formal hierarchy is optimized for internal efficiency, which is not the same as efficient for customers. This is why we wait on hold when calling customer support, even though the recorded message says “your call is important to us” (of course we know that’s a lie. If the call was important they would answer it, right?).
Instead of being organized for its own internal efficiency, a connected company is organized to be efficient for customers. This kind of organization requires a different approach, something that I call podular design.
A connected company is designed around three main principles:
- Workers are organized in pods, or small teams, that can operate independently without a lot of need for formal approval or permissions from higher-ups.
- This relative autonomy is made possible by platforms -- support systems and structures that allow teams to self-organize, giving them access to the tools, expertise and information they need to do their work. Platforms also include the policies and boundaries that people in the company must adhere to.
- The work is coordinated by a strong sense of common purpose. People in connected companies understand who they are working for, and why the work is important.
When combined strategically, pods, platforms and purpose create a powerful form of organization that is fast, flexible and adaptive, by which I mean it can learn quickly and adapt to new market situations faster than a traditional hierarchy.
Fagan: Your work often focuses on cultural change. Can you explain where culture fits in change initiatives?
Gray: Culture is like the operating system on a computer. It is the hidden software that is embedded in the daily routines, habits, and behaviors of a group. It’s “how things work around here” and much of the cultural dynamics are not written down in the rule book. They have to be learned on the job, by watching others and copying their behavior. Culture manifests itself in who gets hired, who gets rewarded, who gets punished and who gets fired.
Like an operating system, culture makes some things possible and others impossible. Since culture is the behaviors and habits of a group, any change that requires behaviors to change will require the culture to change as well, even if only in a small way. The larger the change, the more important it is to examine the culture which will be the operating system the change depends upon.
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For the last few years I have been working on a design tool, called the Culture Map, which helps people have better conversations about their culture and shines a light on their cultural strengths and weaknesses (and every culture has both).
The question “what is the right culture for our company” depends on many factors. A good culture is a good fit for the company’s competitive environment. Since environments change, what may have been a great culture a few years ago may need to change in order to be relevant in the future.
Fagan: What can companies do to build agility and/or resiliency into their business models?
Gray: Companies should consider the rate of change in their marketplace, as well as the degree of customer-centricity that is needed. The more customer-centric they need to be, and the faster their markets are changing, the more they should consider a more podular design.
Fagan: Do you see any place for hierarchies in modern businesses?
Gray: Absolutely. I do not now and I never have advocated the abolition of hierarchies. It is just as important for organizations to have managers and leaders today as it has ever been. Most connected companies have managers and leaders, and a formal chain of command. But they operate differently. A connected company’s leaders focus on communicating purpose with clarity and passion, and they focus on creating platforms and work environments that allow people to self-organize and do their best possible work.
Most organizations have policies, processes, procedures and policing that are designed to reduce their liability risk and increase their internal efficiency. This way of running a company is like the old Soviet Union, where strategies are determined at the top, five-year plans are made, and the jobs roll down to individuals who don’t have a lot of choice in the matter.
A connected company is more like a city. There is a hierarchy, a mayor, departments who keep the streets clean, the lights on and what have you. There are police to maintain order when necessary. But for the most part, the city runs itself, and the city government focuses on making it attractive and possible for citizens to self-organize and create wealth for everyone.
Title image by Maia Garau.