by Dave Gray, Entrepreneur, Author & Consultant
Think back ten or twenty years. Do you remember the days when you would go into work because you needed access to technology that you didn’t have at home? Maybe you went in to work to use the computers and software to make a flyer for the family picnic, or you went in to use the copy machine or the laser printer to print the flyers.
It used to be that our technology at home was so primitive that we would need to go into work in order to access the more advanced tools. But today, that dynamic has flipped.
What's happened is that regular people like you and me have adopted the cutting edge technologies faster than our companies have. We are using Facebook and Twitter to keep up with friends, to organize our social lives, to share information. Devices like the iPad, the iPhone, and other mobile and digital devices have gotten cheap and good enough that regular, ordinary people can afford them, and we the people have adopted them way faster than organizations have been able to keep up.
Today, we go in to work and say things like, "I can do this at home. Why can't I do this at work? I have Google Docs. I can fire all this stuff up. I can send a message to my whole social network on Facebook and it’s really easy. Why can't I do that at work?"
Thanks to all these social and mobile technologies, customers are now able to organize and share information in new ways. For example, before you go into a restaurant you can read a bunch of reviews. You can sort through and find the best restaurant within five miles, and so on.
We have even seen revolutionary movements like the Arab Spring, where people are using these new tools to connect in networks and self organize in ways that are completely disruptive, not only to companies but even the nation-states that used to be able to control their populations.
This is a real shift in the balance of power, and it’s creating a new kind of marketplace that is very volatile, uncertain, and complex.
This is the marketplace today. We see a lot of startups these days, coming seemingly out of nowhere, and they are rapidly disrupting traditional forms of business.
Imagine being Barnes & Noble or any traditional booksellers today. Imagine what it feels like to TV networks like NBC or CBS. There used to be only three choices for which channel to watch. Four if you count public television. Now there are thousands. Imagine you were a record company selling albums. Look what has happened to that market.
Yesterday it was bookstores and media companies. Today it’s taxi drivers whose business model is being completely disrupted by companies like Uber and Lyft, who use digital technologies and peer-to-peer networks to get you better car service, faster and cheaper than taxis can.
It’s happening to airlines, to hotels, to insurance companies, to financial services, to government. There is no industry that will not be touched in this new world. Think about what things like Skype and Google Hangouts are doing to the telecommunications industry.
The tools of organizing and producing and making things are more getting cheaper, and cheaper, and cheaper, so more and more people can use them. This means more startups, more innovation, more disruption, and more volatility in the marketplace.
This creates a challenge for organizations: How can you respond when the market and the world is changing as fast as it's changing today? When things are as complex, uncertain and ambiguous as they are today, how do you adapt? How do you continue to evolve and adapt the way that you offer your products and services so you can stay relevant?
There's no way to organize in this connected world without becoming a connected company. And the most forward-thinking companies are moving in this direction.
So what must you do to become a more connected organization? That’s a very big question, and not so easy to answer. But there are some clues. We can learn from what some companies are doing, companies that have grown up and demonstrated success in this environment, that have been able to learn quickly and adapt to rapidly-changing market situations, and have been able to scale successfully while continually adapting.
Different companies have done this in different ways. But, really, what it comes down to in the largest sense is that a connected company is organized so that the smaller parts of the organization can operate and evolve and experiment and actually adapt to their environment.
Let’s take just one example of a leading-edge organization that’s designed to adapt.
Whole Foods Markets is kind of a nice example because it’s pretty easy to understand. It’s a grocery store. But it's not like most grocery stores where you are going to get the same stuff everywhere you go in the world or everywhere you go in the country. Whole Foods Markets has basically made each store relatively autonomous. In fact each region is relatively autonomous, each store is relatively autonomous, and even each team within the store has autonomy and a degree of freedom with regard to how they run their operation. At each level there is the opportunity to run a business within the larger business.
Whole Foods does this because they want to be able to adapt very specifically to every market they enter.
So if you go into a Whole Foods in Silicon Valley, or New York, or wherever you live, you are going to see a very different set of stuff than I'm going to see here where I live, in St. Louis. I'm going to see stuff that's locally sourced from local farmers and suppliers, and you are going to get stuff that's locally sourced from your community.
Teams at Whole Foods have the ability to self organize and work with customers and adapt to their local environment in a way that you can't really do in many companies.
How do they do this?
Each store is an autonomous profit center made up of about ten self-managed teams, who manage various aspects of the store, like produce, deli and so on.
Each team has control over its own fate. Performance data is available to all the teams, so they can compare their performance against other teams in their store, similar teams in other stores, or against their own team’s historical performance.
Teams also have access to detailed financial data, like product costs, profits per store, and even each other’s compensation and bonus information. They can look up the best-selling items at other stores and compare them to their own. Employees at Whole Foods are so well-informed that the SEC has designated all employees “insiders” for stock trading purposes.
This data transparency both builds trust and fuels a spirit of intense competition between teams and stores, since every team can compare itself with every other team and try to raise in the ranks.
Whole Foods has created a platform that makes it possible for the company’s stores and teams to compete with each other so they can tune and improve their performance over time.
At the same time, each team has the autonomy to make local decisions as they see fit to improve their performance. So every Whole Foods store carries a unique mix that is tailored by self-managed teams for that particular location. This strategy allows them to target extremely small locations with highly customized stores. They are starting to open small stores in suburbs and college towns where rents are lower and competition less fierce.
The industry average sales per square foot is about $350, and Whole Foods is one of the top ten retailers in the US, with sales of about $900 per square foot, higher than Best Buy and Zale jewelers1
. Not bad for a grocery store.
Employees like it too. Whole Foods has made Fortune’s “100 best places to work” list every year since the list was started in 1998.
Whole Foods is just one company, but there are many others like it that are transforming the business landscape. In the words of science-fiction author William Gibson, “The future is already here, it’s just not evenly distributed.”
If you haven’t started connecting your company yet, now would be a good time to start.
1Ranking U.S. Chains by Retail Sales per Square Foot, RetailSails, 2011.