By Kellsey Ruppel-Oracle on Jun 23, 2014
by Dave Gray, Entrepreneur, Author & Consultant
Who is Dave Gray?
I’m an entrepreneur and designer who has worked on change and innovation initiatives for the last thirty years. I’ve worked with startups and Fortune 100 companies. I’ve worked with companies in finance, energy, defense, technology, media, education, health care, automotive and more. I’ve seen a lot of things in that time, including some amazing successes as well as some catastrophic failures.
In my work with organizations, including growing my own company, I came to see that there are two factors which have the greatest impact on how well an organization can innovate and change. The first is organizational structure, by which I mean how the work is organized, and the way it distributes information and control. The second is organizational culture, by which I mean the habits, behaviors, and informal rules that add up to “the way we do things around here.”
The structure is the organization’s shape and form, while the culture is the life force that animates it. Culture and structure mutually reinforce each other, and the relationship between them is complex.
I have come to believe that both culture and structure can be designed in such a way that an organization can be much more agile and adaptable, so change and innovation come much more easily than they do in a typical organization. Which brings me to the next question: what is a connected company?
Historically, we have thought of companies as machines, and we have designed them like we design machines. Most companies are conceived and designed this way.
A car is a perfect example of machine design. It’s designed to do one thing and does that thing pretty well. It’s controlled by a driver. Mechanics perform routine maintenance and fix it when it breaks down. Eventually the car wears out, or your needs change, so you sell the car and buy a new one.
If one day you need a truck, or a motorcycle for some reason, the car is not going to adapt to your needs. The car is going to stay a car.
And we tend to design companies the way we design machines: We need the company to perform a certain function, so we design and build it to perform that function.
The machine view is very successful in a stable environment. If there is a steady, predictable demand for a standard, uniform product, then machines are very efficient and productive. In such conditions, a machine-like company can profit by producing uniform items in large lots.
But over time, things change. The company grows beyond a certain point. New systems are needed. Customers want different products and services. So we redesign and rebuild the machine to serve the new functions.
This kind of rebuilding goes by many names, including re-organization, reengineering, right-sizing, flattening and so on. The problem with this kind of thinking is that the nature of a machine is to remain static, while the nature of a company is to grow. This conflict causes all kinds of problems because you have to constantly redesign and rebuild the company while at the same time you are trying to operate it. Ironically, the process of improving efficiency is often very inefficient. And the faster things change the more of a problem this becomes.
Companies are not really machines, so much as complex, dynamic, growing systems. After all, companies are really just groups of people who have banded together to achieve some kind of purpose.
A machine’s purpose is designed into its structure. Once a machine’s purpose has been set, it does what it has been designed to do. But if the environment changes, a machine does not have a way to become aware of the change and adjust to the new situation. It just becomes obsolete.
Organisms, on the other hand, control themselves. An organism’s purpose does not come from an outside designer or controller but from within. An organism strives over time to realize its intentions in the world. As conditions in the environment change, an organism responds by adjusting its behavior and improving its performance over time. In other words, it learns.
Now before we had cars we got around using horses. And a horse is a very adaptable kind of transportation. If you were going into a place where you didn’t know if you were going to have roads, or gasoline, well then a horse might very well be a better choice than a car.
And the business world these days is being continually disrupted by new technologies, new ways of communicating and sharing information. It’s a lot more uncertain and unpredictable, which is why a more adaptable, organic approach gives you more flexibility to adapt as things change.
A connected company is one whose culture and structure are designed to continually learn and adapt to a changing marketplace. It is designed more like an organism and less like a machine. Connected companies distribute information and control differently. They organize work differently.
Instead of a hierarchy like you might see in a typical organization chart, a connected company is organized in what I call a podular way. It operates as a network of small, self-directed teams that are supported by platforms and connected by some kind of common purpose. Amazon and Google are organized in this way, as are many others.
Teams that are independent and self-directed can learn and adapt more rapidly than their counterparts in divided organizations, because they don’t have to worry about complicated processes and procedures. They don’t have to get permission from a boss before they act. They interface with other teams through a simple network. This makes it possible to move much faster, make faster decisions and learn faster. This kind of organization is more entrepreneurial.
Think of a shopping mall or a commercial district in a city. The city doesn’t tell people which businesses to operate, they create a space and provide infrastructure which gets filled in with entrepreneurs. This is the core of how connected companies operate. They provide a space and a supporting platform that attracts a more entrepreneurial kind of person.
Adaptation requires learning. Learning requires the freedom to experiment. Today’s business environment is uncertain and variable. It’s impossible to know in advance what kinds of actions will constitute good performance. By giving their employees the freedom to make decisions, connected companies learn and move faster. While others analyze risk, connected companies seize opportunities. While others work in isolation, they link into rich networks of possibility and expand their influence. While others plan, they act.
Connected customers are already demanding more than divided, industrial-age companies can deliver. I’m convinced that as we move toward a more complex, connected, customer-centric world, the businesses that will win will be the connected companies.
Learn more about The Connected Company and Dave in this podcast, and hear more from Dave in our upcoming Digital Business Thought Leadership Series webcast "The Digital Experience: A Connected Company’s Sixth Sense".