Companies Become Self-Organizing Systems As firms develop a peripheral nervous system composed of sensors and a central nervous system with computers that enables the firm to learn, adapt and innovate, we have to ask, “How will those firms be organized and managed to extract the maximum value from these capabilities?”
It’s not yet clear exactly how the most successful businesses of the 21st century will be run in order to most effectively leverage knowledge workers and exploit the advantages of complex adaptive systems. In fact, Peter Drucker argues that this decision remains the most significant management challenge of the 21st century.1
However, over the past 15 to 20 years, dramatic progress has been made toward self-management and self-organization, unleashing the power of the free market within the enterprise. Leading-edge firms and academics are already beginning to develop an understanding of what works and what doesn’t. For example, we know that complex adaptive systems cannot be efficiently controlled by overseers, detailed plans, and other sources of strict top-down control.
Instead, the role of management must be to create the conditions for flexible, self-organizing responses. Andy Clark, a Professor at Washington University and formerly a “research fellow” at the Santa Fe Institute specializing in the study of cognition and artificial life, has identified five forecasts about the qualities of the winning firms in the age of the business eco-system:2
1. In businesses where knowledge, information, and innovation are at a premium, and where the business horizon is marked by uncertainty, flexible “soft assembled” responses and the “simultaneous cheap exploration of multiple options” will become the norm. Soft assembly refers to a specific type of aggregation or organization where elements of varying kinds, such as people with diverse skills and knowledge, are temporarily recruited to form a coherent whole. Soft assembly is relatively easy to undo and permits the rapid reassembly of the components for a new use. We see this in the cooperation of microorganisms in nature, and the same applies to the assembly of taskforces or problem-solving teams in companies. We also see it in the co-opetition among rival companies, as we discussed in Trend #2. Increasingly, this ability to rapidly and effectively reassemble to meet short-term demands will become a critical success factor in business. 2. Increasingly the primary role of management will be to create the conditions that will allow the business to self-organize. In this context, self-organizing means reassembling in response to environmental shifts and opportunities, and make timely use of outside resources, including other firms, as effective “scaffolding” for its activities. Scaffolding refers to the external sources of order and influence that enable our individual and collective brains to solve complex problems. In the context of solving problems within an enterprise, scaffolding consists of all of the external aids and supports individuals and teams use. These aids include structuring the physical environment in a certain way; one of the leaders in this area is IDEO, where every physical element in the work place ? from toys to room layouts to colors ? has been chosen to maximize creativity. Other forms of cognitive scaffolding include the specific words and phrases used in the workplace, the social norms that are encouraged, and the economic incentives that are put in place. In other words, mangers will quit micromanaging tasks and start managing contexts.3. Companies will increasingly use open or porous corporate architectures with minimal hierarchical structure and maximal inner diversity. The whole idea is to permit the rapid and free flow of ideas. Highly respected companies like General Electric took the first steps toward such boundarylessness in the 90s. Such principles will become fully developed and pervasive during this decade. 4. Management will increasingly recognize the power of “gentle interventions,” such as providing new “tags.” Tagging involves providing labels for important objects, feature, or procedures so that they create the desired connotations within the organization and beyond. Tagging not only permits identification but, more importantly, encourages people to build mental models, creative thoughts, and imaginative problem-solutions.5. Managers will increasingly learn to avoid forcing preconceived solutions to problems. The well-evolved business organization, not the manager, knows best. Therefore the best managers will “listen to the system.” They will learn to intervene in ways that respect and maintain the successful strategies that emerge from the ground up. It’s important to remember that just like the brain that “coordinates the body’s functions,” or the DNA in the human genome, managers don’t have all the answers. It has been estimated that a full molecular specification of a human body would require 5x1028 bits of information, whereas the human genome only contains 1015 bits. That means that the DNA of the human genome contains only one-ten-billionth of the information it would have to have in order to specify every feature of the body. It doesn’t even have enough coding capacity to support a detailed plan of the human brain, much less of the whole brain-body system. As a result, nature must rely on a variety of less direct methods, such as providing a variety of well-chosen guidelines to the developing organism that has its own intrinsic properties and dynamics. These properties, when embedded in a complex environment, are able to do the rest.
The big trend in managing is for managers to remember that they are not smarter than nature itself. They are learning how to set the context, provide the proper environment, and let the people closest to the problem work together, using their knowledge and insight to solve the company’s biggest problems.
References List :1. Management Challenges for the 21st Century by Peter F. Drucker is published by HarperCollins Publishers, Inc. ⓒ Copyright 1999 by Peter F. Drucker. All rights reserved.The audio summary of Management Challenges for the 21st Century is available from Audio-Tech Business Book Summaries. Ask for catalog #9991.2. The Biology of Business: Decoding the Natural Laws of Enterprise by John Henry Clippinger is published by Jossey Bass. ⓒ Copyright 1999 by John Henry Clippinger. All rights reserved.
